AUD/USD posted gains but was unable to consolidate and ended the week with small losses. The upcoming week has two events. Here is an outlook at the highlights and an updated technical analysis for AUD/USD.
The Reserve Bank of Australia released the minutes of its most recent policy meeting. Members said that there was no need to ease monetary policy for now, as the steps it had taken were working “broadly as expected”, and the economy was recovering. Although the bank remains in accommodative mode, the bank seems more optimistic, which is good news for the Australian dollar. Manufacturing PMI accelerated for a third successive month, rising from 53.4 to 53.9 in August. The 50-level separates expansion from contraction.
Over in the US, the Philly Fed Manufacturing index slowed to 17.2, down from 24.1 beforehand. Unemployment claims surprised by climbing to 1.1 million, above the estimate of 930 thousand. The Federal Reserve minutes were dovish. Members stated concern about the continuing adverse impact of Corvid-19 on the US economy. The minutes also reiterated a call from Fed Chair Jerome Powell on the need for a fiscal package from Congress to boost the struggling economy. The week ended with good news from the manufacturing sector, as Manufacturing PMI improved to 53.6, its highest level since February 2019.
- Construction Work Done: Wednesday, 1:30. The construction sector continues to struggle, as this key indicator has failed to post a gain since Q2 of 2018. In the first quarter of this year, the release declined by 1.0%, which was better than the forecast of 1.5%. However, the forecast for the second quarter stands at -6.5%.
- Private Capital Expenditure: Thursday, 12:30. The business sector has reined in spending due to severe economic conditions. This is reflected in Private Capital Expenditure, which has recorded declines in five straight quarters. In the first quarter, the indicator declined by -1.6% and analysts are braced for a softer Q2, with an estimate of -8.2%.
AUD/USD Technical Analysis
Technical lines from top to bottom:
We start with resistance at 0.7513, which has held since June 2018.
The round number of 0.74 is next.
0.7315 has held since December 2018. 0.7238 follows.
0.7165 is an immediate resistance line.
0.7087 is the first support line.
0.6937 is next.
0.6825 (mentioned last week) switched to support in early June, when AUD/USD started a major rally. It is the final support line for now.
I remain neutral on AUD/USD
The Aussie has steadied in August, after posting strong gains in recent months. Covid-19 has taken a heavy toll on both the US and Australian economies and it could be another quiet week for AUD/USD.
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