AUD/USD Forecast July 27-31 – Aussie climbs to 17-mth high

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AUD/USD posted its strongest weekly gain since early June, climbing 1.5%. The streaking Australian dollar punched above the 71 level for the first time since February 2019. The upcoming week has four events, including the consumer price index. Here is an outlook at the highlights and an updated technical analysis for AUD/USD.

After back-to-back gains above 16%, retail sales settled down with a modest rise of 2.4%. The National Bank of Australia Quarterly Business Index pointed to worsening conditions, dropping from -11 to -15. The manufacturing and services PMIs both improved, with readings of 53.4 and 58.5, respectively. A reading above 50.0 indicates expansion.

For the first time since April, US weekly unemployment claims were higher than the previous week. Last week’s reading of 1.41 million was up from 1.30 million. Analysts had expected jobless claims to remain steady at 1.3 million. The US Manufacturing PMI has been showing contraction for the past four months, with readings below the 50-level. Still, the index has been moving upwards and showed strong improvement in June, climbing from 39.8 to 49.6. The upswing continued in July, with a reading of 51.3, but this was shy of the forecast of 52.0.
AUD/USD daily chart with support and resistance lines on it. Click to enlarge:
  1. Inflation Report: Wednesday, 1:30. Australian CPI is released on a quarterly basis, which increases the impact of each release. In Q1, inflation slipped to 0.3%, down from 0.7% beforehand. This was the lowest level since Q1 of 2019. There was better news from Trimmed CPI,  which excludes the most volatile items. The index rose from 0.4% to 0.5%. This reading was the highest level since Q2 of 2018. Analysts are braced for a downturn in Q2 – the headline reading is projected to decline by 2.0%, while core CPI is expected to slow to 0.1%.
  2. Building Approvals: Thursday, 1:30. Building approvals slumped in May, with a sharp drop of 16.4%. This figure was much weaker than the forecast of -7.0%. The estimate for June stands at -2.0%.
  3. Chinese Manufacturing PMI: Friday, 1:00. For a third straight month, the index came in just above the 50-level, which separates contraction from expansion. In June, the index rose slightly to 50.9, up from 50.6 beforehand. We can expect more of the same in July, with a forecast of 50.8.
  4. Private Sector Credit: Friday, 1:30. With Covid-19 creating havoc with the economy, credit levels have fallen off. In April, the indicator contracted by 0.1%, after a flat zero reading beforehand. Analysts are projecting another decline of 0.1% in May.

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AUD/USD Technical Analysis

Technical lines from top to bottom:

We start with resistance at the round number of 0.74. This is followed by 0.7315.

0.7250 has been a resistance line since February 2019.

0.7165 has held firm since early April.

0.7056 has switched to a support role after strong gains by AUD/USD last week.

0.6983 is next.

0.6825 (mentioned last week) switched to resistance in early June, when AUD/USD started its current rally.

0.6744 is the final support line for now.

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I remain bullish on AUD/USD

AUD/USD has positive momentum, as the pair has jumped 2.9% in July. With investors feeling sour towards the US dollar, the pair’s upward movement could continue this week.

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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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