AUD/USD downside compelling for the days ahead


  • AUD/USD downside expectations as the markets buy into the US dollar.
  • The FOMC and domestic CPI data will be the focus for the week ahead. 

AUD/USD is starting the week off flat in a quiet beginning to what is expected to bring plenty of actin considering what is at stake in the Federal Open Market Committee.

At the time of writing, AUD/USD is trading at 0.7363 and between a 6 pip range in early Asia. 

With risk sentiment volatile,  AUD/USD has moved below the 0.7400 level for the first time since late 2020.

A correction in iron ore prices has also been a thorn in the side of the currency that had benefitted from strong prices earlier in the year. 

There is nothing domestic of note on the calendar for today but the week’s main event in Australia is the release of the second-quarter inflation figures. 

However, the Reserve Bank of Australia is particularly dovish at the moment and It is not likely that one high inflation reading is going to be enough to generate a U-turn in their tone.

However, covid risks are problematic for the currency. Sydney is reported to announce an extended lockdown today until mid-September.  Continuing lockdown restrictions were imposed on Greater Sydney four weeks ago, so it is not a new development to cause too much disruption in forex.

Instead, all eyes will be on the US dollar.

The greenback has benefitted the most so far and since June when FX volatility picked up and the currency would be expected to remain firm into Wednesday’s FOMC meeting.

The Federal Reserve will have to deal with the reality of above-trend growth and higher than first expected inflationary pressures.

The Fed will be expected to indicate that tapering should emerge in 4Q this year, with the possibility of a first hike coming in 4Q22.

If 2Q21 GDP growth – expected at 8-9% quarter-on-quarter annualized – plus also June readings for personal consumption and the PCE deflator, all arrive strong, the US dollar should continue to gain.

Subsequently, this could weigh on the commodity-fx for the weeks ahead, particularly the Aussie. 

AUD/USD technical analysis

Chart of the Week: Commodity-FX in focus, bears in control

As per the above analysis, ''from a daily perspective, the price has corrected 50% of the prior daily bearish impulse near 0.7390 and bears are looking for an imminent optimal short entry point on the lower time frames:

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

How do emotions affect trade?
Follow up our daily analysts guidance

Subscribe Today!    

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD remains pressured after US data misses estimates

EUR/USD is trading closer to 1.1750, paring its recovery from earlier in the day as the safe-haven dollar is bid. US Consumer Sentiment missed estimates with 72 points in September. The financial woes of China's Evergrande are weighing on sentiment.

EUR/USD News

GBP/USD trades under 1.38 amid on UK data, dollar strength

GBP/USD is on the back foot, trading under 1.38 after UK Retail Sales figures disappointed with -0.9% in August, worse than expected. Brexit uncertainty and dollar demand weighed on the pair earlier. 

GBP/USD News

XAU/USD surrenders intraday gains, drops closer to $1,750 level

Gold struggled to preserve its intraday gains and dropped to the lower end of the daily trading range during the early North American session. 

Gold News

Experts say Ripple will win SEC lawsuit, which might propel XRP to new all-time highs

The latest development in the ongoing SEC vs. Ripple lawsuit is that documents are classified as privileged and blocked for public viewing. Though institutional investors are yet to take big bets on the altcoin in 2021, retail investors are actively trading in XRP.

Read more

US Michigan Consumer Sentiment Preview: Markets will have to look hard for positive signs

Consumer outlook expected to rebound to 72.2 in September. August’s 70.2 was the lowest since December 2011. Inflation and Delta variant wearing on US optimism. Markets face negative dollar risk from fading consumer optimism.

Read more

Forex MAJORS

Cryptocurrencies

Signatures