What’s next for the AUD?

Key Points:

• After a volatile week, the AUD’s future is in question.

• Lack of much Australian news leaves the pair exposed to US risk events.

• Technical bias is somewhat mixed.

The AUDUSD had a rough week last week which brings into question whether or not the pair’s recent rally can extend any further. Indeed, there are some early signs that the Aussie Dollar could be making a beeline for the 0.75 handle which may have the bears excited. As a result, it might be worth taking a closer look at what happened last week and what we can expect moving ahead.

The Aussie Dollar was under pressure from the get go last week, declining all the way to the 0.7539 level before things finally turned around. This bearish momentum stemmed from a number of robust US data releases that largely eclipsed the 2.2% uptick in the Aussie HPI figure and a flat MI Leading Index posting. In particular, the US Existing Home Sales result of 5.62M worked against the pair and sparked the biggest single day rout for the AUD this month. However, on Friday, the Aussie Dollar did bounce back somewhat as the US PMI data proved disappointing – subsequently causing the pair to close the week out only moderately lower at the  0.7567 handle.

As for what lies ahead, it is another quiet week on the Australian news front which will mean the US data is driving prices once gain. Of the figures due out, the GDP and Jobless Claims are likely to be the key results to watch for but some comments from Yellen could also be worth looking at as well. Most Fed members have remained rather hawkish in the wake of the recent hike which suggests that the top dog is likely to take a similar tone. If this is indeed the case, it could see selling pressure build from as early as Tuesday and this might see the AUD have yet another disappointing week.

On the technical front, the Aussie Dollar is actually relatively neutral and could go either way this week. On the one hand, the Parabolic SAR and the EMA bias are bullish – signalling that the bears may not be in complete control just yet. However, on the other hand, the pair is about to run into some fairly stiff resistance around the 0.7580 handle which may prove rather difficult for the bulls to break through in the absence of a fundamental upset. What’s more, both RSI and stochastics are neutral which gives the AUD a significant degree of freedom moving forward but also indicates that it may begin to range. Importantly, resistance is present at the 0.7580, 0.7636, and 0.7679 levels whilst support will be seen at 0.7532, 0.7486, and 0.7435.

Ultimately, we can expect a fairly flat week for the AUD and the pair is likely to remain within the 0.7580 – 0.7532 range. Nevertheless, keep an eye on those fundamentals as they could disrupt the sideways movement if they come in significantly above or below expectations.