AUD/USD Weekly Forecast: Definitions won't come this week

• Upbeat Australian and Chinese data turned old history with Melbourne’s coronavirus outbreak.
• Gold prices had lost the positive momentum as central banks paused massive stimulus.
• AUD/USD lost its bullish strength, but the bearish potential remains well-limited.

The AUD/USD pair is modestly up for a fourth consecutive week, still unable to conquer the 0.7000 threshold. Nevertheless, the pair managed to hit a weekly high of 0.7037, not far from the high set this year at 0.7063. The Aussie had seen its bullish potential limited by the latest decision to lockdown Melbourne, which overshadowed encouraging data coming from the country and the region. Also, enthusiasm backed the commodity-linked currency, but the rally faded alongside the positive mood.

Tensions between the US and China also had an impact on the AUD. This past week, US President Trump signed the Hong Kong autonomy act, putting an end to trade preferences with the region after China established a new security law. Also, the US government was said to be studying a travel ban on Chinese members of the Communist Party, something like 90 million people.

Meanwhile, on-hold central banks have put a halt to gold’s rally. The metal continues to trade around $1,800 a troy ounce, a multi-year high, yet with policymakers pausing in adding massive stimulus to support economies, demand for the metal paused, also contained by resurgent demand for equities.

Old data overshadowed by a new lockdown

Australian NAB’s Business Confidence Index improved to 1 in June, beating the expected -87 while the NAB’s Business Conditions in the same month came in at -7 against the expected --39. Additionally, the country added 210.8K jobs in June, almost doubling the market’s forecast, while the unemployment rate met the market’s expectations at 7.4%, a new multi-year high.  However, the upbeat numbers were overshadowed by the new lockdown, as investors are already pricing in an upcoming drop in July and August figures.

Another upbeat figure that was ignored is the Chinese Q2 GDP. The economy grew 11.5% in the three months to June,  beating the expected 9.6%, while Industrial Production in the country rose in June by 4.8% YoY. The only miss was Retail Sales, which in the same period declined by 1.8%. The country’s trade surplus was also weaker than anticipated, posting a surplus of $46.42B in dollar terms.

The next week will bring the RBA Meeting Minutes and the July Westpac Leading Index, previously at 0.19%. The country will also publish the preliminary estimate of July Retail Sales, and the preliminary July Commonwealth Bank PMIs.  According to forecasts, manufacturing activity is seen recovering further within expansion territory.  The US will see the release of the Markit PMIs for the same period, although the activity is expected to have worsened when compared to the previous month.

AUD/USD Technical Outlook

The technical picture for the AUD/USD pair has not changed much. The weekly chart shows that the pair holds above a mildly bearish 100 SMA, which provides dynamic support around 0.6900. The 20 DMA has turned marginally higher far below the current level, while the 200 SMA maintains its bearish slope around 0.7270. The Momentum indicator eased from overbought levels, still well into positive ground, as the RSI indicator consolidates around 60. All of these suggest that bears are nowhere to be found, and while bulls may be reluctant to push the pair beyond 0.7000, the risk is still skewed to the upside.

Daily basis, the pair is neutral-to-bullish. It has been confined to the 0.6900/0.7000 area pretty much since the month stated, although as it happens in the longer-term chart, the downside potential seems limited. The pair is finding support in its 20 DMA, which develops below the larger ones. Technical indicators, in the meantime, head nowhere within positive levels.

The pair would need to clear the yearly high at 0.7063, to be able to extend its gains towards 0.7110 the next relevant resistance. Above this last, there’s little in the way towards the 0.7200 figure. Supports come at 0.6900, 0.6840 and 0.6770. A break below this last seems quite unlikely. 

AUD/USD sentiment poll

According to the FXStreet Forecast Poll, the AUD/USD pair is seen slowly grinding lower over the next few weeks, although the average targets in the three time-frame under study stand around 0.6900, the lower end of the latest range. The pair is seen bearish weekly basis, and neutral in the longer-term perspective, although in all cases, bears surpass those hoping for another leg north.

The Overview chart reflects the easing positive momentum, as moving averages have lost their bullish strength, rather stabilizing at their recent highs. Anyway, seems too early to call for a top, but instead, charts are reflecting the lack of directional strength.

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