AUD/USD Weekly Forecast: Bears could take their chances this week

The AUD/USD pair has fallen to a fresh 2020 low of 0.7591 this week, ending it with modest losses below the 0.7700 level. The Australian currency was weighed by a sour sentiment that sent equities down. The poor sentiment was partially triggered by soft data indicating slow economic progress within the pandemic scenario, but also by an equities scandal that took by storm financial markets.

Equities turmoil hit the aussie

Gamestop shares soared amid retail investors’ actions gathered on social media looking for a short squeeze. The stock collapsed on Thursday as different brokers put restrictions in place on options trading, taking new positions and hiked margin levels. The frenzy grew as restricting trading borders illegality.  The situation is far from over, and turmoil will likely extend into the upcoming days.  Meanwhile, Wall Street is firmly lower at the end of the week.

Gold prices managed to bounce some, which prevented AUD/USD from falling further. The bright metal was backed by soaring silver prices, which fell under individual investors’ radar mid-week and also soared.

Market players ignored data

Australia published the December Westpac Leading Index, which contracted to 0.12% form 0.69%. Inflation in the country was up by 0.9% YoY in the last quarter of the year. On the other hand, Business Confidence contracted from 13 to 4 in December, according to NAB.

In the US, The Federal Reserve announced its latest monetary policy decision, and as widely estimated, they left rates and bond-buying programs unchanged. The central bank reiterated that the “path of the economy would depend significantly on the course of the virus, including progress on vaccinations,” while adding that the pace of the recovery in economic activity and employment has moderated in recent months. A generally dovish statement maintained markets in risk-off mode.

Durable Goods Orders rose by a modest 0.2% in January. However, Q4 Gross Domestic Product resulted at 4.0%, beating expectations, while weekly unemployment claims continued shrinking, down to 875K in the week ended January 22.

However, investors attention was diverted from tepid macroeconomic figures, which are part of the new normal.

Employment and growth

Next Monday, China, Australia and the US will publish their respective January Manufacturing PMIs,  which will provide fresh hints on economic progress. On Tuesday, the RBA will have a monetary policy meeting, but little action is expected this time. Australia will later publish the final version on December Retail Sales, and the  Services PMI for the same month.

The week will end with the US publishing the January Nonfarm Payroll report. The country is expected to have added 85K new jobs in the month, while the unemployment rate is foreseen steady at 6.7%.

AUD/USD technical outlook

The AUD/USD is ending a second consecutive week with a doji, although with the lower low for the year, the risk skews to the downside. In the weekly chart, however, nothing is suggesting a steeper slide ahead. The pair continues to develop above all of its moving averages, with the 20 SMA heading north above the larger ones. Technical indicators have barely retreated from weekly highs, holding near overbought readings.

The daily chart indicates that bears are gathering strength. The pair broke below its 20 SMA which now stand pat around 0.7720. Technical indicators hover around their midlines, the Momentum recovering and the RSI directionless, falling short of supporting an upcoming recovery.

Supports are located at 0.7640 and 0.7590 with a break below this last exacerbating the slump. The pair needs to recover beyond 0.7740 to extend its gains towards 0.7815.

AUD/USD sentiment poll

The FXStreet Forecast Poll reflects the growing bearish potential. Bulls are a majority in the weekly perspective, but bears take the lead in the monthly and quarterly ones. The pair is seen holding above the 0.7600 level on average, but moving slowly away from the 0.77 threshold. Those betting for a decline are 50% of the polled experts in the longer-term view.

In the Overview chart, moving averages have turned lower, although with limited downward strength. Some traders are betting for higher levels, but the number of those seeing it falling below 0.7500 has increased. Still, losing the 0.7000 level is out of the picture for now.