AUD/USD Forecast: Bumpy political route not over yet
|- A possible bottom underway, according to market sentiment but 0.7500 still caps
- Political jitters hit the Aussie, trade war also a drag for the commodity-linked currency.
Aussie's positive momentum at the beginning of the week was smashed by political turmoil in Australia, and despite the government came to an agreement by the end of the week, with a new PM included, the AUD was unable to recover its attractive. The USD, on the other hand, remained weak with escalating trade war concerns and Trump's criticism of the Fed's policies taking their toll at the beginning of the week.
The Australian Central Bank released the Minutes of its latest meeting at the beginning of the week, reiterating that there are no aims to change the current monetary policy in the foreseeable future, also that global trade tensions could affect the local economy. Overall, Australian policymakers are confident about growth, and even on inflation despite having downgraded the forecast for this last for this year.
The AUD/USD pair plunged on Thursday on headlines indicating that PM Turnbull suffered a second leadership contest. The leader of the ruling Liberal-led coalition government offered to step down, Parliamentary activity got suspended, and a party meeting was called for Friday. Scott Morrison, the former treasurer, become the new PM by an adjusted 45 to 40 votes, beating Peter Dutton, the man who launched the strike against Turnbull.
Morrison said that his immediate priority will be the drought, and how the government will work on an immediate response to the issue. He added that there are no plans for an election any time soon, but that he will work "to ensure we bring the parliament back together, that we can continue to work to ensure that our country stays close together." Things settled temporarily, but it's a bumpy ride ahead from the political side and seems likely that this is not the last time the AUD suffers from political disagreements.
For the upcoming week, Australia has little to offer in terms of macroeconomic news, with the most relevant events that could affect the price being Chinese official manufacturing and non-manufacturing PMI, to be out early Friday.
Trade tensions and political jitters haven't been an exclusive concern for Aussies and will remain the main market motor of currencies.
AUD/USD technical outlook
The weekly range for the AUD/USD pair has been quite wide, yet is poised to close the week just modestly up at around 0.7330 level. The pair struggled mid-week to overcome the 61.8% retracement of its August decline, at around 0.7350 but was unable to do so, now stuck around the 38.2% retracement of the same slide. In the weekly chart, the pair has posted a higher high, and a higher low, which partially offsets the dominant negative tone. Nevertheless, the pair keeps developing there well below all of its moving averages, and with the shortest maintaining a sharp downward slope, as technical indicators continue to head nowhere within negative levels. This last could be the first sign of a long-term bottom being underway but would need another week of gains and a higher high to sustain such case.
In the daily chart, the pair is below a strongly bearish 20 SMA, with the largest also heading south above the shortest, aligned to support a bearish extension ahead. Technical indicators in this last time frame have posted shadow bounces after sinking Thursday to fresh weekly lows, far below their midlines, limiting chances of a bullish run. The 0.7240/50 region is the immediate support, followed by the yearly one set at 0.7200. A break below this last exposes 0.7160, where the pair has several relevant lows from 2016. To the upside, the mentioned 61.8% retracement is the first resistance, followed by 0.7400. Beyond it, the pair has room to extend its advance up to the 0.7440/50 region, a major static resistance area.
AUD/USD sentiment poll
The FXStreet Forecast Poll shows that market players do expect additional declines in the Aussie, but that a bottom is not far Away. The weekly perspective indicates that bears are at 54% targeting on average 0.7286. The negative sentiment was reversed in the 1 and 3 months perspectives, with bulls increasing above 50%. The average targets, however, have little changed, still below the 0.7400 figure. Speculative interest seems to have drawn a barrier around 0.7500, also clear in the Overview chart, with the largest number of monthly targets accumulating around it. Bulls will likely gain confidence on a break above the level. The mentioned chart shows also that moving averages bounced, but that the wide range of possible targets maintains uncertainty on top of AUD/USD.
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