AUD/USD Weekly Forecast: Bullish breakout imminent

The AUD/USD pair remained trapped for a third consecutive week, ending this last session near the upper end of the range. The Australian currency continues to lack a life of its own, with the pair instead depending on whether speculative interest sells or buys the greenback. The latest impulse came from disappointing US employment figures, which sent the pair up to the 0.7840 price zone.

Uneven progress towards normal

The dollar fell with bad news and good news. Generally speaking and leaving aside the NFP report, US data was upbeat, hinting at a sooner-to-come economic recovery. However, US Federal Reserve voting members spent quite a lot of energy clarifying that they would not change the current monetary policy regardless of higher inflation. US Treasury yields fell with such comments, accelerating their slump on Friday, as inflation and rate hikes have fallen off investors’ radar. At the same time, mostly positive data and an on-hold Fed for longer boosted equities.

At the other shore of the Pacific, things are also progressing at an uneven pace. Australia has reopened its borders with New Zealand, but it seems unlikely it will come back to international travel until mid-2022. The news had a negative effect on the aussie, despite market participants doing their best to ignore pandemic-related headlines.

The Reserve Bank of Australia had a monetary policy meeting, leaving its current policy unchanged as widely anticipated.  Policymakers repeated that rates would remain at current levels at least until 2024, announcing a review of its current stance for next July.

Gold was a key factor these days, as the bright metal soared to its highest since mid-February, hitting $ 1,843 a troy ounce and retaining most of its gains as the week comes to an end.

Macro data backs faith

Australian figures released these days were generally encouraging, as April PMIs indicated a continued improvement in the manufacturing sector. The AIG index improved from 59.9 to 61.7, while the Commonwealth Bank Index beat expectations by printing at 59.7. Services output also held at healthy levels, as the Commonwealth Bank Services PM resulted in 58.8. Construction-related figures were also upbeat, as well as inflation ones, as April TD Securities Inflation rose 2.3% YoY. The negative note came from the Trade Balance as the surplus shrank to 5574 million in March.

The US had quite a busy calendar. The official ISM Manufacturing PMI came in at 60.5, while the ISM Services PMI printed at 62.7, both below expected but largely signaling a continued expansion in both sectors. The focus, however, was put on employment-related data. The latest weekly unemployment claims report contracted to 498K, its lowest reading since February 2020. Worth noting that such a contraction in unemployment benefits does not count on the April Nonfarm Payroll report, which collects data up to two weeks before the release.

However, official data showed that the US added a measly 266K new jobs in April, far below the almost 1 million expected. The unemployment rate increased to 6.1%, instead of decreasing to 5.8%, while the participation rate increased modestly to 61.7%. Wages rose by more than anticipated but resulted way below average, adding to the market’s concerns. Finally, stocks retreated with the figures, while US Treasury yields plunged.

There is little in the docket for the next few days. Australia will release April NAB’s Business Confidence and Business Conditions on Monday and May Westpac Consumer Confidence on Wednesday. On Thursday, it will be the turn of May Consumer Inflation Expectations.

The US will publish on Wednesday, April inflation figures, foreseen at 3.6% YoY, quite a jump from the previous reading. Still, the potential impact will likely be overshadowed by Fed officials’ comments. On Friday, the country will release April Retail Sales and the preliminary estimate of the May Michigan Consumer Sentiment Index, foreseen at 89.5 from 88.3 in April.   

AUD/USD technical outlook

The AUD/USD pair is trading at weekly highs in the 0.7830 region, with higher chances of finally breaking higher. The weekly chart shows that it continued to find support in a mildly bullish 20 SMA, which advances above the longer ones. Technical indicators have picked up within positive levels, although the momentum remains limited.

Down to the daily chart, the risk is also skewed to the upside. The pair is advancing beyond its 20 and 100 SMAs, with the shorter one gaining bullish strength above the longer one. Technical indicators advance within positive levels, with the RSI currently at around 60. The break-through is imminent, although investors would prefer additional confirmations.

There is nothing in the way to 0.7880, the next relevant resistance level, and once beyond this level, the market would like to test the 0.8000 figure. To the downside, an intermediate support level comes at 0.7770, followed by 0.7690. Price sliding below the latter seems quite unlikely in the current scenario.

AUD/USD sentiment poll

According to the FXStreet Forecast Poll, the AUD/USD pair may not be able to extend its latest gains. Most investors seen it holding within familiar levels and at the upper end of the range, but on average, below the 0.7800 threshold on the three time-frame under study. The number of those betting for a decline account 77% of the polled experts in a one-month perspective.

The Overview chart shows that, while most possible targets accumulate in the 0.76/0.80 region, there are some fresh bets on the downside that increase as time goes by. In the quarterly view, the pair is seen as low as 0.72, but also surpassing the 0.80 threshold.  The three moving averages have barely picked up, maintaining the overall neutral stance.

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