AUD/USD Weekly Forecast: Bulls still cautious but unwilling to give up

• Australian employment figures and Chinese trade data taking center stage.
• The RBA and the US Federal Reserve determined to maintain their ultra-loose policies.
• AUD/USD continues to consolidate below 0.7700, needs to recover beyond 0.7770.

 The AUD/USD pair finishes a second consecutive week pretty much unchanged around the 0.7650 level. The commodity-linked currency has remained away from investors radar this week, although it’s quite notable that with the broad greenback’s weakness and record levels in Wall Street, the pair was unable to advance.

The American currency traded with a weak tone after upbeat employment figures spurred demand for riskier assets, to the detriment of the greenback and government bond yields.  

RBA and the Fed in the same path

The Reserve Bank Australia had a monetary policy meeting, but as widely anticipated, the central bank held the cash rate and the 3-year yield target at 0.10%. The accompanying statement repeated that policymakers don’t expect to change interest rates at least until 2024 while noting that  “the economy is operating with considerable spare capacity and unemployment is still too high.”

A note on the RBA: the central bank is concerned about the rise in housing prices.  The  central bank noted: “housing price growth (and to a lesser extent housing borrowing) has picked up notably in recent months and is being watched closely by regulatory authorities.” Policymakers are closely watching the housing market after years of working to prevent a bubble in the sector.

Crossing the Pacific, the US Federal Reserve also had something to say on monetary policy these days. The Fed published the Minutes of its latest meeting, which showed that policymakers agreed to maintain the current policy unchanged. The document showed that, while they acknowledged economic progress, they remain cautious and will maintain an ultra-loose monetary policy until “substantial further progress” toward the Fed’s goals on inflation and employment is achieved. Tapering is out of the picture for now, as uncertainty surrounding real GDP growth and the employment outlooks are still elevated.

Busy days to come in the data front

The Australian macroeconomic calendar had little to offer. The country published March TD Securities Inflation, which improved to 1.8% YoY and the AIG Performance of Services Index for the same month that printed at 58.7. The services sector in the country remained in expansion territory in March as the Commonwealth Bank Services PMI improved to 55.5 from 53.4 in February.

US data was mixed. The official US ISM Services PMI jumped to 63.7 in March, showing a 10th straight month of growth for the services sector, which has expanded for all but two of the last 134 months. However, the February Goods Trade Balance posted a wider-than-expected deficit of $ 71.1billion, while weekly unemployment claims unexpectedly surged to 744K in the week ended April 2.

The next week will bring March Australian NAB’s Business Confidence and April Westpac Consumer Confidence. The country will also unveil April Consumer Inflation Expectations and March employment figures.

As for the US,  the country will unveil March inflation data on Tuesday. It will also release March Retail Sales next Thursday and the preliminary estimate of the April Michigan Consumer Sentiment Index on Friday.

Speculative interest will also keep an eye on Chinese trade data, to be out next Tuesday, mainly focused on exchange figures with Australia.

AUD/USD technical outlook

On a weekly basis, the AUD/USD pair is at risk of falling but would need to break below April’s low at 0.7531 to confirm a new leg south. The Head & Shoulders formation is still valid with a likely 450 pips decline on a bearish breakout of the neckline area. In the mentioned time-frame, the pair developed for a second consecutive week below a still bullish 20 SMA. The Momentum indicator extended its decline below its 100 line, maintaining its bearish slope, while the RSI has lost directional strength, currently consolidating around 55.

In the daily chart, the risk remains skewed to the downside. The pair is unable to advance beyond the 20 and 100 SMAs, which converge in the 0.7660/80 price zone, with the shorter about to cross below the longer one. Technical indicators remain within negative levels, seesawing within familiar levels and heading marginally lower.

The 0.7530/60 area provides support, with a break below it favoring an extension toward 0.7450. To the upside, the pair needs to clear 0.7710 first and 0.7770 later to return to the bullish path.  

AUD/USD sentiment poll

The FXStreet Forecast Poll indicates that the AUD/USD pair will remain around the current level, without signs of an imminent bearish breakout. Slides are expected in the near-term, as 67% of the polled experts are beating for a decline with an average target of 0.7566. In the monthly and quarterly views, bulls take the lead, with the pair foreseen stable above 0.7600.

In the Overview chart, the neutral stance remains the same. Moving averages are flat in all the time-frame under study, with most possible ranges confined to the 0.7500/0.8000 range.

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