AUD/USD Forecast August 5-9 – Wobbly Aussie drops to new 2019 low

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AUD/USD posted sharp losses for a second straight week, declining 1.6%. The focus in the upcoming week will be on the RBA, which releases its monthly rate decision. Here is an outlook at the highlights and an updated technical analysis for AUD/USD.
The Federal Reserve pressed the rate trigger last week, as the Fed lowered rates for the first time in 10 years. The key question facing investors is whether the move is a “one and done” or is there more easing to come? Clearly, Fed Chair Jerome Powell clearly didn’t want to tip his hat too much in his press conference, but his comment that the cut was a “mid-cycle adjustment to policy” seemed to hint against further easing in the near future. This perception sent the U.S. dollar higher, while stocks headed south. Elsewhere, U.S. employment numbers were a mix. Wage growth gained 0.3%, above the forecast of 0.2%. However, nonfarm payrolls slipped to 164 thousand, down sharply from 224 thousand a month earlier.
In Australia, key consumer indicators headed higher. CPI improved to 0.6% in Q2, up from zero in the previous quarter. Trimmed Mean CPI, which excludes the most volatile items in CPI, ticked up from 0.3% to 0.4%. Consumer spending strengthened, as retail sales climbed to 0.4%, marking a 4-month high. In China, the manufacturing sector continues to point to contraction. The official manufacturing PMI came in at 49.7, while the Caxin manufacturing PMI came in at 49.9.
AUD/USD daily graph with support and resistance lines on it. Click to enlarge:
  1. AIG Services Index: Sunday, 22:30. The index has posted two successive readings around the 52-level, pointing to limited expansion in the services sector. We will now receive the July release.
  2. MI Inflation Gauge: Monday, 1:00. This monthly inflation indicator helps analysts track inflation on a monthly basis. The indicator has been stuck at zero for the past two months, as inflation remains at low levels.
  3. ANZ Job Advertisements: Tuesday, 1:30. In June, the indicator halted a nasty streak of declines, with a strong gain of 4.6%. Will the positive direction continue in July?
  4. RBA Rate Decision: Tuesday, 4:30. The markets are still buzzing about the hyper-dovish RBA, which made back-to-back rate cuts earlier in the summer. The benchmark rate currently stands at 1.0% and no change is expected at the upcoming meeting. A dovish rate statement could send the Aussie downwards.
  5. AIG Construction Index: Wednesday, 22:30. The index remains mired below the 50-level, which points to contraction in the construction sector. In June, the index improved to 43.0 points.
  6. RBA Monetary Policy Statement: Friday, 1:30. This quarterly release provides a broader view of the economy than the short rate statement. A dovish policy statement would be bearish for the Australian dollar.

*All times are GMT

AUD/USD Technical Analysis

AUD/USD broke through support at 0.6825 (mentioned last week) late in the week. This line had not been tested since the first week of January.

Technical lines from top to bottom:

With AUD/USD dropping sharply last week, we start at lower levels:

0.7165 has held in resistance since early April.

0.7085 was a low point in September. 0.7022 is next.

0.6988 marked the low point in April.

0.6865 has some room as resistance as AUD/USD continues to lose ground.

The pair broke through 0.6825 late in the week. This line had held in support since the first week in January.

0.6744 was a low point in January. Will this support line break this week?

0.6686 was a cap back in January 2000.

0.6627 has held in support since March 2009.

0.6532 is next.

0.6456 is the final support level for now.

I remain bearish on AUD/USD

The Australian economy continues to feel the effects of the slowdown in China, and the announcement that the U.S. will impose further tariffs on China could dampen risk appetite and add to the Aussie’s misery. The currency has lost 2.5% in July and the downward trend has extended into August.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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