AUD/USD Weekly Forecast: Pressure mounts, but bulls are not giving up

• Australian data was mixed these days but still encouraging.
• Wall Street participants have already digested the Fed’s aggressive stance.
• AUD/USD is at an inflexion point with limited bearish potential.

The AUD/USD pair trades around the 0.7400 level, down for a second consecutive week. The aussie has been relatively resilient to the broad greenback’s strength, partially helped by firmer commodity prices and partially due to contained declines in stocks markets. Wall Street has already priced in the US Federal Reserve’s aggressive monetary policy stance, and the latest inflation figures spurred hopes price pressures may be close to a top.

Risk-off having a limited impact

Nevertheless, financial markets remain in risk-off mode. Record inflation around the globe keeps worsening amid a coronavirus outbreak in China, leading to local lockdowns and the Eastern European crisis. Both are exacerbating supply chain issues, one of the main reasons price pressures are soaring.

In the past week, gold prices soared, with the bright metal currently changing hands at around $1,973 a troy ounce, usually a bullish factor for AUD/USD. But in general, commodity prices are on the rise amid shortages related to the Russian invasion of Ukraine. President Vladimir Putin has said that diplomatic talks are at a dead-end, as Kyiv has broken the agreement reached in Turkey. Attacks continue, and western nations keep piling up sanctions on Russia, although

The Australian economy keeps recovering

Australian data was mixed. March NAB’s Business Confidence improved by more than anticipated to 16, while NAB’s Business Conditions were also higher, reaching 18. However, Westpac Consumer Confidence fell to -0.9% in April, while March employment-related figures disappointed.  The country added just 17.9K new jobs in March, missing the market’s expectations. In the mentioned period, the country lost 2.7K part-time jobs while adding 20.5K full-time positions. The Unemployment Rate held steady at 4%, missing the 3.9% anticipated by analysts. Finally, the Participation Rate also remained unchanged at 66.4%.

The US published the March Consumer Price Index, up to 8.5% YoY, a fresh multi-decade high. The core figure rose by less than anticipated, reaching 6.5% in the same period. Ahead of the release, the White House warned it could be “elevated,” and the final reading was taken positively, as market participants were anticipating a much worse figure. Still, inflation remains at worrisome levels, although at least the Federal Reserve is working on it.

 The upcoming week will start with China publishing March Retail Sales and Industrial Production and the Q1 Gross Domestic Product. Asian shares were sharply down on Friday, hinting at a risk-off start to the next week, which could be fueled by discouraging Chinese data.

Later in the week, Australia will release housing-related data and the March Westpac Leading Index. By the end of the week, S&P Global will publish the preliminary estimates of the April PMIs for all major economies.

AUD/USD technical outlook

From a technical perspective, AUD/USD is at an inflexion point. The pair is hovering around the 38.2% retracement of this year’s rally, measured from 0.6966 to 0.7660. The weekly chart shows that technical indicators eased within positive levels but also that their bearish strength is limited. In the same chart, the pair is above all of its moving averages, although the 20 SMA is between the longer ones. Overall, the ongoing decline seems corrective.

According to the daily chart, the chances of a bearish extension are greater. The pair is developing below a now flat 20 SMA, while the longer ones are also directionless, although below the current level. Technical indicators, in the meantime, head firmly lower within negative levels.

Once below 0.7390, the pair could extend its decline towards 0.7310, the next Fibonacci support level, en route to 0.7230. The main resistance level to watch is 0.7500, as once above it, the pair could recover up to the aforementioned yearly high.

AUD/USD sentiment poll

The FXStreet Forecast Poll hints at a bearish extension. The AUD/USD pair is seen bearish in the three time-frame under study, although at the time being, the downside seems limited. The pair is seen on average around the 0.7300 level in all cases. Still, a bearish breakout is not confirmed.

The Overview chart shows that the three moving averages are neutral to mildly bullish, reflecting investors’ reluctance to sell the pair. The monthly and quarterly moving averages aim marginally higher, while the spread of possible targets is quite wide, a sign of directional uncertainty.