AUD/USD Weekly Forecast: Test of October 2021 on the cards, then what?

The AUD/USD pair has advanced for a second consecutive week, reaching a fresh 2022 high of 0.7536. Despite a generally risk-averse environment, the Australian Dollar found its way higher, helped by commodity prices. The Russian invasion of neighbor Ukraine triggered concerns about global supplies, sending oil and natural gas prices to multi-year highs. The dismal market mood also helped gold prices, which in turn underpinned the aussie.

Powell vs Lowe

Central Bank imbalances did not take their toll on the pair, despite US Federal Reserve Chairman Jerome Powell becoming more aggressive on monetary policy by hinting he will favor a 50 bps rate hike in the upcoming May meeting. He also explained that they would likely complete plans for a balance sheet reduction by the time of the next decision.

Reserve Bank of Australia Governor Philip Lowe, on the other hand, maintained the patient stance, barely indicating that a rate hike before year-end is possible. The US has six more in the docket for 2022, according to the dot plot.

However, escalating tensions in the Ukraine-Russia front boosting commodity prices would not be enough to keep the AUD on the winning side for long. Shortages and supply chain issues will likely aggravate and take their toll in all major developed economies.

Australian data failed to impress. The March Commonwealth Bank PMIs came in worse than anticipated, according to preliminary estimates, but remained in expansionary territory. In the US, February Durable Goods Orders were down 2.2%, much worse than the -0.5% expected. The preliminary Markit estimates of the US March PMIs were upbeat, while Initial Jobless Claims for the week ended March 18 shrank to 187K, beating expectations. Finally, the March Michigan Consumer Sentiment Index was confirmed at 59.4.

Australia will publish February Retail Sales next week, foreseen up 1%. The country will also release February Private Sector Credit and Building Permits. Also relevant, China will unveil the official March NBS PMIs, with the manufacturing sector expected to have fallen into contraction territory.

The US will publish the Nonfarm Payroll Report, expected to show that the country added 450K new jobs in March, while the Unemployment Rate is expected to print 3.7%. Also, the country will release the March ISM Manufacturing PMI.

AUD/USD technical outlook

From a technical point of view, AUD/USD is poised to extend its gains. The weekly chart shows that it continued to advance beyond its moving averages, while technical indicators offer a strong upward momentum within positive levels.

The daily chart offers a similar picture, with the 20 SMA having crossed almost vertically the longer ones, all of them over 200 pips below the current level. The Momentum indicator is heading firmly higher, but the RSI is stable at around 67, hinting at a possible bearish corrective movement.

The immediate resistance level is the October 2021 monthly high at 0.7554, followed by the 0.7600 level. Above the latter, the pair could extend its rally towards the 0.7670 price zone. On the other hand, the corrective decline could kick in if the pair slides below 0.7490, and approaches the 0.7400 level afterwards, where buyers should come back to maintain the bullish trend alive.

AUD/USD sentiment poll

The FXStreet Forecast Poll reflects mounting speculation for AUD/USD correcting its latest rally. The pair is expected to remain sideways around 0.7500 in the near term, but turn bearish afterwards, holding anyway above the 0.7300 mark. Those expecting the pair to retreat are around 80% of the polled experts in the monthly and quarterly views.

The Overview chart shows that bulls are in full control, as moving averages head firmly higher in the three time-frame under study. Chances of a side below the 0.7000 threshold have decreased sharply, with most targets still accumulating above the 0.7200 mark.