AUD/USD Weekly Forecast: Additional gains in doubt as environment stays risk-averse

The AUD/USD pair advanced for a third consecutive week and is currently trading at around the 0.7200 level, helped by soaring gold prices and a lack of greenback demand despite the dismal ruling mood.

Speculative interest was focused on developments on the Ukrainian-Russian border, as the latter has been deploying troops to the region, and Western nations fearing an invasion. Moscow wants Ukraine to be permanently barred from joining the North Atlantic Treaty Organization  (NATO) and to cease all military activity in Eastern Europe. The West has aligned behind Kyiv, and at some point, Russia announced it would pull back troops, although in reality, it has done the opposite. At this point, uncertainty reigns about how much more things could escalate. In such a scenario, safe-haven assets appreciated to the detriment of higher-yielding ones, although the greenback was left aside.

RBA is still waiting for wage growth

The lack of interest in the greenback could be explained through the absence of fresh clues on what may happen next March when the Federal Reserve meets again. The FOMC Meeting Minutes confirmed that policymakers are ready to hike and move on with plans to reduce their balance sheet. Investors were disappointed about voting members maintaining a measured approach to monetary policy tightening. Ahead of the release, speculative interest was pricing in up to a 75 bps hike in March, but this fell to 50 bps after the event, another factor weighing negatively on the dollar’s demand.

Across the pond, the Minutes from the Reserve Bank of Australia showed that local policymakers are willing to be patient on inflation. The central bank noted it picked up more quickly than expected but noted that they want to see wages respond further before moving interest rates. The RBA stated that wages continue to lag and do not expect them to reach the desired levels until 2024. Hence, a rate hike will have to wait until then.

In the last few days, Australia published the January Westpac Leading Index, which improved from 0% to 0.13%. Also, the country released the January employment report, which showed that the country added 12.9K new jobs, but all of them partial ones, as it lost 30K full-time positions. The Unemployment Rate remained steady at 4.2%, while the Participation Rate increased to 66.2%.

The US, on the other hand, published January Retail Sales, which unexpectedly increased by 3.8% in the month, much better than the 2.0% expected. Industrial Production and Capacity Utilization improved in January, although Initial Jobless Claims were up to 248K in the week ended February 11.

The next week will bring the US  second estimate of Q4 Gross Domestic Product, expected to be upwardly revised from 6.9% to 7%, and January Durable Goods Orders, among other minor reports. Additionally, Markit will release the preliminary estimates of the US February PMIs.

Australia will offer the Commonwealth Bank PMIs and the Wage Price Index, seen at 2.4% YoY.

AUD/USD technical outlook

From a technical point of view, further recoveries in the AUD/USD pair are still unclear. The weekly chart shows that technical indicators have continued to advance but also that they are still below their midlines. Moving averages in the mentioned time frame are confined to a tight range, with the pair currently in between. An inflection point could be 0.7313 – this year’s high – as large stops are likely accumulated above it.

The daily chart shows that the pair has moved above a  directionless 20 SMA, but that an also flat 100 SMA, providing resistance around 0.7250. The Momentum indicator is in retreat mode within positive levels, while the RSI indicator heads nowhere around 54, hinting at lack of interest instead of decreased strength.

The mentioned 0.7250 and 0.7315 areas are the levels to watch en route to the 0.7400 figure. The risk of a bearish extension should increase if the pair falls below 0.7140, exposing 0.7070 first and the 0.7000 threshold later.

AUD/USD sentiment poll

The FXStreet Forecast Poll suggest that the AUD/USD pair may maintain its positive tone in the near term, seen bullish in the weekly perspective. However, it could change course afterwards, as bears control the monthly and weekly views.

The Overview chart offers quite a neutral stance, as moving averages are directionless in all cases. The number of those betting for a decline in the monthly view is expecting modest slides, and waiting for the pair to hold around or above 0.7000. Lower lows are likely in the quarterly view, although some experts believe that the pair can recover up to the 0.7600 level.