The pressure on Australia continues

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  • An optimistic Reserve Bank of Australia failed to support the AUD.
  • The Federal Reserve is about to cut, but wouldn’t say so.
  • AUD / USD is under strong selling pressure and is expected to hit new lows in 2021.

AUD / USD was little changed for a second straight week, trading around the 0.7360 level. The pair peaked at 0.7426 mid-week and struggled to hold on to the 0.7400 level, but finally dropped out on Friday after much better-than-expected US jobs figures were released.

Central banks in the spotlight

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

Investors were looking for a more accommodating position, given the economic setback resulting from the latest blockages located in the country. Governor Philip Lowe & Co, however, remained optimistic about economic progress, noting that they would act if necessary.

Surprises also came from the US Federal Reserve. Vice President Richard Clarida said the central bank would likely meet its economic targets by the end of 2021 and start raising rates again in 2023, but added that inflation remained around or above 3% d ‘by the end of the year, he wouldn’t. 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. Additionally, retail sales were confirmed at -1.8% in the same month. Building permits were down 6.7% in June, while mortgage loans contracted 2.5%. Finally, TD Securities inflation stood at 2.6% year-on-year in July, down from the previous 3.0%, while the trade balance posted a huge surplus of $ 10.46 billion. of Australian dollars in June.

The US Nonfarm Payroll report showed that the country created 943,000 new jobs in July, while the unemployment rate contracted to 5.4%, far exceeding market expectations. The underemployment rate decreased to 9.2%, while the participation rate increased to 61.7%. The strong report came after the July ISM Services PMI printed at 64.1, much better than the previous 60.1. The same month’s manufacturing index contracted to 59.5, missing market expectations.

In the coming days, Australia will release NAB’s Business Confidence for July, scheduled for July 15, and NAB Business Conditions, expected to be 10. Australia will also release August Westpac Consumer Confidence, previously at 1.5%. Finally, the country will publish consumer inflation forecasts in August, forecast at 3.8%.

The American calendar will be lighter. The most relevant events will be the July Consumer Price Index, with an expected annual base reading of 4.3%, and the preliminary estimate of the Michigan Consumer Sentiment Index for August, expected. to 82.0 against 81.2 previously.

AUD / USD technical outlook

From a technical standpoint, the risk is on the downside as the pair is barely resting above a daily ascending trendline from this year’s low of 0.7288. In the weekly chart, the pair remains well below a bearish SMA of 20, while the longer ones lack directional strength below the current level. Technical indicators remain directionless within negative levels, favoring yet another unconfirmed southerly step.

The daily chart offers a neutral to bearish position. The pair is developing below a bearish 20 SMA, while the 100 SMA continues to move south well below the current level. The Momentum indicator is consolidating around its midline, while the RSI indicator has turned south towards 41.

A strong level of static support stands at 0.7290, with a breakout below exposing 0.7220. Once below the latter, there is room for the pair to extend its slide towards the 0.7100 number. Bears will remain in control as long as the pair is trading below 0.7440, although an extension beyond this would favor a continuation towards 0.7500.

AUD / USD Opinion Poll

the FXStreet Forecast Survey shows that the AUD / USD pair is likely to prolong its fall in the near term. 67% of experts polled are bearish in the weekly perspective, with an average target of 0.7318. The bulls dominate the monthly and quarterly views, although buying interest appears to be waning over time. The dispersion of possible targets in the quarterly view is quite wide, signaling uncertainty among market participants.

The overview chart shows that the shorter moving average is maintaining a firmly bearish slope, as downward momentum weakens over the month. However, bears are regaining control over the longer term, with the three-month moving average accelerating southward.


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