AUD/USD Weekly Forecast: Aussie may fall, but not by much

• FOMC’s and RBA’s Minutes showed that policymakers are still concerned.
• Australian macroeconomic data surprised to the downside, capping the aussie.
• AUD/USD is technically neutral in the longer-run, modest bearish potential.

The AUD/USD pair is finishing the week with modest losses, trading around the 0.7740 level.  Despite the broad greenback’s weakness, the aussie has remained unable to attract speculative interest.  The pair’s behaviour has been directly correlated to that of Wall Street, which in turns moves only on sentiment.

Central banks Minutes

The US inflation/Federal Reserve/government bonds yields’ trilogy remained was once again the main market’s motor. News that some US policymakers are open to discuss a tighter monetary policy spurred an equities sell-off and pushed yields higher, giving the greenback a temporary respite on Wednesday. The FOMC’s latest Minutes also showed that central bankers believe uncertainty remains elevated and reiterated that they need substantial progress toward their main goals to consider a change in the current monetary policy.

The Reserve Bank of Australia also published the Minutes of its latest meeting. Speculative interest was waiting for hints of a tighter monetary policy, as policymakers said that they would review it next July. The document showed that the central bank wants annual wage growth to more than double to its highest in over a decade to meet its inflation goals, as the Board believes that wage would likely need to expand by "sustainably above 3%" to generate inflation. Once again, policymakers repeated that such a scenario is unlikely to occur before 2024.

 The Australian dollar continues to remain afloat, despite yet another factor that should have boosted the currency. Spot gold soared to $ 1,889.96 a troy ounce, its highest since early January. The tepid dollar’s demand and the sour tone of equities favored demand for the bright metal. Also, base metals have maintained their bullish strength mounted on hopes for a brighter economic future.

Is this a bearish scenario for the pair? Not at all, actually. The greenback would recover if the US Federal Reserve confirms a movement toward reducing quantitative easing.

Negative surprises in Australian data

Australian data fell short to impress. The Wage Price Index was up 1.5% YoY in the first quarter of the year, slightly better than the previous 1.4%, but far below average and the RBA’s 3% target. Westpac Consumer Confidence unexpectedly contracted to -4.8% in May from 6.2% previously, while Consumer Inflation Expectations in the same month rose to 3.5% from 3.2%, missing the market’s expectations.

On the employment front, the country lost 30,600 positions vs the expected 15,000 increase. The participation rate fell to 66%, which helped the unemployment rate contracting to 5.5%, a “fake” improvement. Finally, the preliminary estimates of the Commonwealth Bank PMIs for May came in mixed, but at least indicated expansion.

The US posted some mixed figures. Housing-related data was weaker than anticipated in April, as Building Permits surged a measly 0.3% while Housing Starts fell 9.5%. Regional indexes showed signs of continued improvement, as the NY Empire State Manufacturing Index came in at 24.3 in May, while the Philadelphia Fed Manufacturing Survey printed at 31.5. The most encouraging reading was Initial Jobless Claims for the week ended May 14, which were down to 444K, the lowest reading since March 2020.

The US will publish some relevant figures next week. The main event will be April Durable Goods Orders, scheduled for next Thursday and foreseen at 0.8% MoM. The US will also publish Q1 Personal Consumer Expenditures and the usual weekly employment-related figures. The country will also release May Consumer Confidence. Australia will release the April Westpac Leading Index on Wednesday, previously at 0.38%.

On Friday, Markit published its preliminary May PMIs, which beat expectations as manufacturing output rose to 61.5 and the services index printing a whopping 70.1.

AUD/USD technical outlook

Anyway, AUD/USD pair keeps trading in the 0.77/0.78 range, where it has been for over a month already. In between, the pair peaked at 0.7890, but the rally has been short-lived. The weekly chart shows that the pair keeps holding just above a mildly bullish 20 SMA, which remains far above the longer ones. Technical indicators turned south, currently standing in neutral levels.

In the daily chart, the pair is neutral. It keeps finding buyers around a bullish 100 SMA, while technical indicators are piercing their midlines, although without enough strength to confirm an upcoming leg south.

The pair has an immediate support level in the 0.7690 area, followed by the 0.7620 price zone. Below the latter, a slide toward 0.7530 seems likely. Resistances come at 0.7820 and 0.7890 this month’s high.

AUD/USD sentiment poll

The FXStreet Forecast Poll shows that bulls are not yet willing to give up. The pair is seen neutral in the near-term, but rising in the monthly and quarterly perspectives. However, the pair is seen on average, holding whiting familiar levels in the three time-frame under study.

The Overview chart shows that most possible targets in the weekly perspective accumulate just below the current level, but that changes in the wider perspectives, with higher chances of a test of the 0.8000 area. The shorter moving averages remain directionless while the longer one turned higher, as most polled experts see the pair between 0.76 and 0.82.

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