- AUD/USD recaptures the critical 0.70 handle this week.
- Upbeat trade data from China and broad USD weakness boost the pair.
- Coming up early next week: Chinese industrial production and GDP data and RBA minutes.
The AUD/USD pair started the week under a modest pressure as last Friday's upbeat employment allowed the greenback to continue to gather strength. After slumping to its lowest level in more than two weeks at 0.6909 on Wednesday, however, the pair staged a rebound and rose above the critical 0.70 mark.
The data published on Tuesday showed that the National Australia Bank's Business Confidence Index dropped to 2 in June from 7 in May. Furthermore, the Westpac Consumer Confidence Index slumped to -4.1% in July from -0.6% to reveal a deteriorating consumer sentiment. On a positive note, home loans, which were expected to contract by 0.6% on a monthly basis in May, stayed flat. More importantly, the data from China on Friday showed that the trade surplus widened to $50.98 billion in June to beat the market expectation of $44.65 billion by a wide margin and provided a boost to antipodeans.
On the other hand, FOMC Chairman Powell during his semi-annual testimony before the Congress on Wednesday acknowledged the negative impact of uncertainties surrounding the trade policy and the global economic outlook and reiterated that the Fed will act 'as appropriate' to sustain the U.S. economic growth to make it difficult for the greenback to preserve its strength.
Although the U.S. Bureau of Labor Statistics monthly inflation report, which showed that the core Consumer Price Index in June ticked up to 2.1% to surpass analysts' estimate of 2%, helped the dollar limit its losses, the US Dollar Index closed the week modestly lower.
When the markets return to action on Monday, investors will be paying close attention to the macroeconomic data releases from China that include retail sales, industrial production, and the second quarter GDP growth. On Tuesday, the Reserve Bank of Australia is scheduled to publish the minutes of its July meeting, at which the bank decided to cut its policy rate by 25 basis points. RBA Governor earlier this month said that they were prepared to adjust the interest rates again if needed and markets will be looking for clues on the timing of the next rate cut. Later in the week, on Thursday, labour market data from Australia will also be looked upon for fresh impetus. On the flip side, the U.S. economic docket will feature retail sales figures and FOMC Chairman Powell's speech on Tuesday.
AUD/USD Technical Outlook
Technically, the weekly chart points to a neutral outlook with the Relative Strength Index (RSI) staying close to the 50 mark. However, the pair seems to be having a difficult time rising above the 20-week moving average for the second straight week, suggesting that buyers haven't been able to take control of the pair yet.
Looking at the daily chart, the bullish picture becomes more clear with both the RSI and the Momentum indicators confirming this view. Moreover, the pair continues to move away from the 20-day moving average, which is also turning north on the same chart.
The initial resistance on the upside could be seen at 0.7025 (100-day moving average) ahead of 0.7090 (200-day moving average) and 0.7205 (Apr. 17 high). On the other side, 0.7000 (psychological level) aligns as the first support followed by 0.6950 (20-day moving average) and 0.6830 (Jun. 18 low).
According to the FXStreet Forecast Poll, following this week's modest rebound, markets are indecisive regarding the pair's next short-term direction. On a one-month view, however, the majority of participants see the pair trading below the critical 0.70 mark.
Looking at the Overview chart, a large portion of the experts expect the pair to continue to push lower toward 0.69 and 0.68 while a handful of them look to see prices above 0.71 in the next month or so.
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