AUD/USD Weekly Forecast: Bears poised to challenge the 0.7000 psychological support

The AUD/USD pair plummeted to 0.7105, a fresh 2021 low, bouncing just modestly from the level ahead of the weekly close, as demand for the commodity-linked currency plunged alongside investors’ confidence.

The week started with China publishing weaker-than-anticipated economic data, as Industrial Production and Retail Sales rose at a slower than expected pace in July. Concerns about global growth dominated financial markets alongside hints coming from the US Federal Reserve on soon to come tapering.

The US central bank released the Minutes of the Federal Open Market Committee’s latest meeting, and the document showed that participants had escalated their tapering talks. The market is pricing in that the Fed will kick-start reducing facilities in the last quarter of the year, despite some policymakers believing it would be better to wait until 2022. On employment, there is a generalized agreement that the country is not yet there, although divergences about inflation perspectives persist.

Data fails to impress

At the same time, speculative interest is struggling to define where major economies are standing in their recoveries’ paths. Unimpressive macroeconomic data was not a Chinese exclusive, as the US reported that Retail Sales contracted by 1.1% MoM in July, while in Australia the Westpac Leading Index shrank to -0.11% in July.

Unexpectedly, employment-related data was mostly encouraging. US Initial Jobless Claims declined to 348K in the week ended August 13, while Australia managed to add 2.2K new jobs in July vs an expected loss of 46.2K. Nevertheless, the country also reported an annual Wage Price Index of 1.7% in Q2, better than the previous 1.5% but below the 1.9% expected and far away from the Reserve Bank of Australia’s target.

Speaking of which, the RBA released the Minutes of its latest meeting, which showed that policymakers noted that the latest outbreak of the coronavirus Delta variant interrupted the economic recovery, adding they remain open to respond as needed. On the timing of a possible change in the current monetary policy, the central bank still thinks of 2024 as the time for a rate hike.

Growth and Jackson Hole in the spotlight

The upcoming week will start with the preliminary Australian Commonwealth Bank PMIs, and the preliminary estimates of Markit PMIs for the US, all of them for August. Throughout the week, the calendar will include US Durable Goods Orders and Australian Retail Sales.

 However, the main event of the week will be the Jackson Hole Symposium starting on Thursday. The annual meeting, meant to discuss important economic issues that affect the world´s economies, usually sees the presence of multiple central banks’ heads and market participants follow the event in the hopes of getting fresh clues on the future of economic policies.

Bank of England governor Andrew Bailey and European Central Bank President Christine Lagarde are not attending the conference this year due to coronavirus restrictions. Federal Reserve chief Jerome Powell will speak on Friday, with the market’s attention focused on this specific event.

AUD/USD technical outlook

The AUD/USD pair has fallen ever since the week started but is poised to close Friday flat around 0.7140. From a  technical perspective, the risk is skewed to the downside, as the weekly chart shows that the pair collapsed below its 20 and 200 SMA, currently battling the last barrier, a mildly bullish 100 SMA. In the meantime, technical indicators head firmly south within negative levels, approaching oversold readings and without signs of giving up.

According to the daily chart, the bearish case is firmly in place. The pair is developing roughly 200 pips below its 20 SMA, while the 100 SMA crossed below the 200 SMA, both far above the shorter one. Meanwhile, the Momentum indicator keeps heading south, while the RSI indicator consolidates around 27.

If the pair breaks below the 0.7100 level, it has scope to test the psychological threshold at 0.7000. The level may attract some buying interest but it seems unlikely bears will easily give up. The next support level comes at 0.7020. On the other hand, resistance levels come at 0.7200 and 0.7295.

AUD/USD sentiment poll

According to the FXStreet Forecast Poll, the AUD/USD pair may have reached an interim bottom. The pair is seen sideways in the near term, and bullish in the monthly and quarterly perspectives. Bulls stand at 83% and 77% for the long-term views, although on average, the pair is seen standing well below the 0.7500 figure.

The Overview chart shows that the weekly moving average heads south almost vertically, while the monthly one has picked up modestly amid most targets accumulating between 0.7400 and 0.7600. On the quarterly view, bears are back in control, as the moving average accelerated its slide. Worth noting a wide spread of possible targets, indicating uncertainty about the pair’s future.

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