- Solid Australian employment fell short of motivating investors.
- AUD/USD dominated by bears, increased chances of a decline toward 0.7200 region.
The AUD/USD pair is finishing its fifth consecutive week around the 0.7400 level, and little changed for a second consecutive one, subject to equities moves, these last driven by sentiment. If it were by fundamentals, the Aussie should be much higher this week, as not only the RBA Minutes were quite encouraging, but local employment data also surprised to the upside, reaffirming the central bank's stance.
Despite leaving rates on hold, the Reserve Bank of Australia released the Minutes of its latest meeting last Tuesday, which showed that policymakers believe that the next move in rates will likely be up, should progress in lowering unemployment and boosting inflationary pressures continue. On a down note, and as it is happening with central bankers worldwide, they also expressed concerns about the downside risk that trade tension between the US and China represent to growth, also about the impact of high household debt on the economy.
As for the employment report, Australia added 50.9K new jobs in June, with the bulk of them full-time positions, up in the month by 41.2K. The unemployment rate remained steady at 5.4%, while the participation rate surged to 65.7% from the previous 65.5%. Australian employment surged by the most this year, and a steady jobless rate as more people entered the labor force, suggest that there's plenty of room for more jobs, a first step toward the so needed wages' growth.
The greenback, of course, had its saying on the pair's behavior, as on Friday, it was dollar's weakness which sent the pair higher, despite plummeting equities. Fears that President Trump could somehow interfere with the Fed's decisions on monetary policy, triggered a sell-off that ended up benefiting the Australian currency.
For the upcoming day and in the macroeconomic calendar, Australian quarterly inflation to be released next Wednesday outstands. The Q2 CPI is expected to have advanced 0.5% QoQ and by 2.2% YoY. There won't be relevant Chinese releases, but the country's response to the latest US President Trump menace of slapping more tariffs on the Asian country will probably lead the way.
AUD/USD technical outlook
The weekly chart for the AUD/USD pair maintains a neutral-to-bearish stance, as the pair is well limited to a 150 pip's range for over a month already. The chart also shows that buying around the bottom of the range, the 0.7300 area, is quite strong, as the last four candles present long downward sticks. However, selling interest keeps capping the upside in the 0.7440/50 region. The pair continues developing far below its moving averages, with the 20 SMA gaining downward traction below the larger ones, all of them over 250 pips above the current level. Indicators turned modestly lower within negative territory, but lack clear directional strength.
In the daily chart, the technical stance is neutral, with the pair hovering around a flat 20 DMA, but holding below bearish larger ones, as technical indicators lack directional strength, having been moving back and forth around their midlines pretty much since the month started. To be able to advance, and discourage bears, the pair would need to break above 0.7490, surpassing there this month high, with room then to extend its advance up to 0.7550. Beyond this last, 0.7620 is the next relevant resistance. Supports from here come at 0.7270 and 0.7310, with a break below this last favoring a test of 0.7250.
AUD/USD sentiment poll
The FXStreet forecast poll shows that bears continue dominating the pair, being a majority in the three time-frames under study. The average targets come in the 0.7300 region, although the overview chart shows that the pair could come closer to the 0.7200 level in the 1-month view, where the larger number of targets accumulate. In the three-month view, and while the range of possible objectives is wider, the trend is also pointing for a downward move, although a slide below 0.7000 seems still limited.
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