AUD/USD Weekly Forecast: Bullish bias intact heading into a busy week
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Aussie firmer amid notable dollar supply and surging equities.
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The RBA to stand pat, leave doors open for additional easing.
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AUD/USD ends the week at 20-month highs, what’s next?
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The FX Poll shows experts expect a downward correction
The AUD/USD pair is set to end the week on a solid footing above 0.7300, the highest levels since December 2018. The main catalyst behind the Aussie's surge this was the decline in the US dollar across its major rivals. The greenback slumped to weekly lows amid expectations of lower interest rates for a longer period after the US Federal Reserve (Fed) Chair Jerome Powell unveiled a new monetary policy strategy at the annual Jackson Hole Symposium. The record-breaking rally in the US stocks combined with the rally in iron-ore and gold prices also underpinned the winning momentum in the spot. The bulls also cheered the progress on the US-China phase one trade deal. AUD/USD is up 4% on a YTD basis while on track for a 2.50% weekly gain.
The improving coronavirus situation in Australia’s second-most populous state of Victoria also boded well for the Aussie dollar. The trend in the new infections is declining, with the daily numbers expected to dip below 100 next week, as the state enters enter the fifth of six weeks of lockdown. The state recorded 113 new cases for the second straight day on Friday.
Meanwhile, investors ignored ongoing Sino-Australian tensions, especially China’s suspension of the imports of beef from Australian firm John Dee Warwick. Also, the mixed US economic releases, including the Q2 GDP, Jobless Claims, and Consumer Spending, had little impact on the major.
China PMIs, RBA and US NFP in the spotlight
Looking ahead, the bulls are gearing up for a busy week, with a raft of significant macro releases due on the cards alongside the Reserve Bank of Australia (RBA) September monetary policy meeting. The highlight of the week is expected to be the US Non-Farm Payrolls data, which will throw fresh light on the strength of the nascent US economic recovery. Earlier in the week, the Chinese Manufacturing PMIs could boost the persistent upbeat mood around the Aussie dollar, as the factory activity in Australia’s top trading partner is expected to accelerate at a quicker pace in August.
Meanwhile, the RBA is widely expected to leave its monetary policy settings unchanged after the resumption of bond-buying last month. The policymakers are likely to remain in a wait-and-see mode amid a slowdown in the virus cases and the recent appreciation in the exchange rate value. The minutes of the August RBA meeting showed that the board members agreed that they will maintain the monetary policy accommodative.
The economic releases from the Australian docket are unlikely to be market moving and therefore, could have a limited impact on the local currency. Amid the Q2 business inventories, July private sector, and building approvals, the Q2 GDP estimate and July Retail Sales will garner some attention in the second half of the next week.
AUD/USD Technical Outlook
The path of least resistance for the AUD/USD pair appears to the upside, as observed in the daily chart.
The spot is poised to test the five-month-long rising wedge resistance at 0.7391 after this week’s bullish attempt.
The Relative Strength Index (RSI) lies just under the overbought territory, implying that there is more room to the upside. The spot holds above all the major daily Simple Moving Averages (DMA), which also adds credence to the uptrend.
A daily closing above the abovementioned hurdle is critical to test the August 2018 highs of 0.7454. The buyers will then find the motivation to take on the 0.7500 barriers.
On the flip side, a failure to take out the 0.7391 resistance, the spot could fall back towards the tough cushion at 0.7188, the convergence of the horizontal 21-DMA and pattern support.
Acceptance below the latter will negate the bullish bias, calling for a test of the 50-DMA at 0.7077. The next downside target is seen at 0.7000, below which the bullish 100-DMA at 0.6838 will be put at risk.
AUD/USD Sentiment
The FXStreet Forecast Poll is showing that investors foresee a downward correction after the recent surge. Price targets have been upgraded when looking at the previous week, but remain on a descending trend.
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Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
