AUD/USD Weekly Forecast: Pressure on the aussie continues

• An optimistic Reserve Bank of Australia fell short of supporting the AUD.
• The Federal Reserve is preparing to taper but would not say it.
• AUD/USD under strong selling pressure and set to reach fresh 2021 lows.

The AUD/USD pair is little changed for a second consecutive week, trading around the 0.7360 level. The pair peaked at 0.7426 mid-week and struggled to retain the 0.7400 threshold, but finally gave up on Friday, after the release of much better than anticipated US employment figures.

Central banks in the spotlight

The RBA surprised markets positively with its latest monetary policy. The central bank left the cash rate at 0.1% as expected, as well as the 3-year bond yield target at the same level. The central bank decided to maintain its previous decision to reduce its weekly bond-buying in September to A$ 4 billion per week, at least until mid-November. Policymakers reiterated that they do not expect to raise the cash rate until at least 2024.

Investors were looking for a more dovish stance, given the economic setback resulting from the latest localized lockdowns in the country. Governor Philip Lowe & Co, however, remained optimistic about economic progress, noting that they will act if needed.

Surprises also came from the US Federal Reserve. Vice-Chair Richard Clarida said that the central bank is likely to hit its economic targets by the end of 2021 and start raising rates again in 2023, but added that inflation remains around or above 3% by the end of the year, he would not consider it just temporary. Quite a comment from a usual dove.

Growth makes the difference

Australian data was mixed, as the AIG Performance of Construction Index contracted to 48.7 In July, while the Commonwealth Bank Services PMI was confirmed at 44.2 in the same month. Also, Retail Sales were confirmed at -1.8% in the same month. Building Permits were down 6.7% in June, while Home Loans contracted by 2.5%.  Finally, TD Securities Inflation came in at 2.6% YoY in July, down from the previous 3.0%, while the Trade Balance posted a whopping surplus of A$10.46 billion in June.

The US Nonfarm Payroll report showed that the country added 943K new jobs in July, while the Unemployment rate contracted to 5.4%, both largely beating the market’s expectations. The Underemployment Rate shrank to 9.2%, while the Participation Rate increased to 61.7%.  The solid report came after the July ISM Services PMI printed at 64.1, much better than the previous 60.1. The manufacturing index in the same month contracted to 59.5, missing the market’s expectations.

In the days to come, Australia will publish the July NAB’s Business Confidence, foreseen at 15 in July, and NAB’s Business Conditions, expected at 10. The country will also release August Westpac Consumer Confidence, previously at 1.5%. Finally, the country will release August Consumer Inflation Expectations, foreseen at 3.8%.

The US calendar will be lighter. The most relevant events will be the July Consumer Price Index, with the core annual reading foreseen at 4.3%, and the preliminary estimate of the August Michigan Consumer Sentiment Index, expected at 82.0 from 81.2 previously.

AUD/USD technical outlook

From a technical point of view, the risk is skewed to the downside, as the pair is barely resting above a daily ascendant trend line coming from this year low at 0.7288. In the weekly chart, the pair remains far below a bearish 20 SMA, while the longer ones lack directional strength below the current level. Technical indicators remain directionless within negative levels, favoring another leg south without confirming it.

The daily chart offers a neutral-to-bearish stance. The pair develops below a bearish 20 SMA, while the 100 SMA keeps heading south well below the current level. The Momentum indicator consolidates around its midline, while the RSI indicator turned south at around 41.

A strong static support level is located at 0.7290, with a break below it, exposing 0.7220. Once below the latter, the pair has room to extend its slide toward the 0.7100 figure. Bears will retain control as long as the pair trades below 0.7440, although an extension beyond the latter would favor a continuation toward 0.7500.

AUD/USD sentiment poll

The FXStreet Forecast Poll shows that the AUD/USD pair will likely extend its slump in the near-term. 67% of the polled experts are bearish in the weekly perspective, with an average target of 0.7318. Bulls dominate the monthly and quarterly views, although buying interest seems to decrease in time.  The spread of possible targets in the quarterly view is quite wide, signaling uncertainty among market players.

The Overview chart shows that the shorter moving average maintains a firmly bearish slope, while the downward momentum eases in the monthly one. However, bears retake control in the longer view, with the three-month moving average accelerating south.