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  • AUD/USD remains bullish above 0.7400 after positive data from China.
  • Market sentiment is improving as Delta variant cases decline in Australia.
  • Investors are keeping their eyes on US ADP and NFP data for further fresh impetus.

The AUD/USD outlook continues to be strong near the 0.7400 level after it recently rose from daily lows early Wednesday morning. While weak retail sales in Australia are ignored, stronger PMI indicators in China play a larger role in the quoted figure against the background of sluggish markets. At the same time, optimism after the RBA exceeds key US data.

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Australia’s preliminary retail sales data showed a 1.8% decline MoM for July, up from a 0.4% decline reported earlier. In keeping with previous forecasts, the AUD / USD showed no significant movement. For July, however, the Chinese services PMI rose above 50.3 to 54.9.

The market’s sentiment is deteriorating as problems with Covid escalate in the US, China, and Australia. A temporary moratorium was issued by U.S. Centers for Disease Control and Prevention (CDC) after the sharpest spike in infections occurred in February; it expires on October 3. Meanwhile, Covid viruses also increased in China, with 96 versus 90, while NSW (New South Wales Australia) saw a two-day decline, with 233 viruses last seen on Monday.

A geopolitical dispute between the West and Iran, and China also impacted the market sentiment. Meanwhile, US Senate infrastructure spending is under the strain of President Joe Biden’s $1.0 trillion blockade, and uncertainty about the Fed’s next move weighs on risk appetite and the AUD/USD.

Despite a bullish Wall Street close, S&P 500 futures showed a slight decline at the time of writing, while the 10-year US Treasury yield climbed to 1.18%.

Next week, AUD / USD will be monitored by Friday’s early signal for US non-farm payrolls (NFP), the July US ADP employment change. A hawkish bias by the RBA is challenging the short-term results of the pair, particularly before NFP.

AUD/USD technical outlook: Trend channel to hold

The AUD/USD pair is heading north beyond the 0.7400 mark. However, the price is still playing with the key resistance level at the moment. As indicated in yesterday’s forecast, the price can head towards the upper range of the bullish trend channel around 0.7430, where the price may see a minor correction before a breakout.

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AUD/USD 4-hour chart outlook
AUD/USD 4-hour chart outlook

On the flip side, the 20-period SMA on the 4-hour chart coinciding with the 50-period SMA at 0.7375 area continues to lend support. Further below, the lower boundary of the trend channel at 0.7340 area may act as secondary support.

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