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AUD/USD Weekly Forecast: Don’t rush to place long bets

  • Tepid Australian macroeconomic data is likely to prevent aussie from appreciating further.
  • US employment figures under the spotlight after Federal Reserve Powell’s words.
  • AUD/USD struggles to extend gains beyond 0.7300, bears hold the grip.

 The AUD/USD pair trimmed most of its previous week losses this one, ending it with gains around the 0.7300 figure. The aussie got boosted by equities, as Wall Street resumed its run to record highs, on speculation the US Federal Reserve would maintain financial support. Such a sentiment began changing on Thursday as multiple Fed officers came out with hawkish comments regarding tightening.

Fed’s tapering and coronavirus

The greenback managed to recover some ground on Thursday, as multiple Federal Reserve officials hint again at soon-to-come tapering. Even further, Chair Jerome Powell said that it could be appropriate to start taper this year, although he noted that "since July, there has been more progress on employment but also the further spread of the Delta variant." Generally speaking, Powell was much more hawkish than anticipated, as most market participants were expecting a non-event.

Despite the hawkish words, Wall Street rallied, further supporting AUD/USD by the end of the week, although the pair si far from losing its bearish long-term stance.

Interest in the Australian currency remained subdued. Data coming from the country missed expectations, with the preliminary estimate of the August Commonwealth Bank Manufacturing PMI contracting by more than anticipated to 51.7 from 56.9. The services index plunged to 43.3, as the sector suffers the most from the current lockdowns. Additionally, July Retail Sales were downwardly revised to -2.7% from a previous -1.8%.

Macroeconomic data falls short of expectations

US macroeconomic news were no better, as according to Markit, the business activity posted its slowest pace of growth in eight months in August. Also, Durable Goods Orders were down by 0.1% in July, while Q2 Gross Domestic Product was upwardly revised to 6.6% QoQ, missing expectations. Finally, core PCE inflation printed at 3.6% in July, in line with the market’s expectations.

During the upcoming week, US employment data will take center stage ahead of the Nonfarm Payroll report to be out on Friday. The country is expected to have added 665K new jobs while the unemployment rate is seen contracting to 5.2%. Also, ISM will publish the official Manufacturing and Services PMIs.

On the other hand, Australia will release August TD Securities Inflation, the Q2 Gross Domestic Product, foreseen at 0.5%, and the July Trade Balance.

AUD/USD technical outlook

The weekly chart for the AUD/USD pair shows that it bounced from its 100 SMA and is currently trading above a directionless 200 SMA while over 250 pips below a still bearish 20 SMA. Meanwhile, technical indicators have bounced from near oversold readings, heading north but still within negative levels.

On the daily chart, the pair is currently battling around a firmly bearish 20 SMA, while far below the longer ones. Technical indicators head firmly higher and are about to cross into positive levels. The pair could recover further in the next few sessions, but the wider perspective suggests that the current advance is corrective and that sellers may soon return.

Bulls could have better chances if the pair breaks above 0.7370, a strong static resistance level, followed by 0.7426, this month’s high. The first support level is located at 0.7200, followed by the year bottom at 0.7105.

AUD/USD sentiment poll

According to the FXStreet Forecast Poll the AUD/USD pair will remain under selling pressure next week, as 86% of the polled experts are betting for lower targets. On average, the pair is foreseen at 0.7224. Bull take over in the monthly and quarterly views, with the pair seen recovering above 0.7300 and 0.7400 respectively.

The Overview chart shows that moving averages have lost their bearish strength, although the longer ones remain flat, amid a widening spread of possible targets, which reflect the absence of a clearer long-term view.

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Author

Valeria Bednarik

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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