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  • Covid weakens the Australian economy.
  • The bad moment of the US Dollar prevented a greater fall of the Aussie.
  • No further action is expected from the Australian Reserve Bank.

The AUD/USD weekly analysis shows a bearish bias. Although the US Dollar remained weaker in the week, the Australian Dollar couldn’t gain as much as its peers did. Despite the fall of the US Dollar during the week following the Fed’s announcements, the Australian Dollar could not benefit due to its precarious economic situation caused by investor fears about the effects of growing infections by Covid-19 in Australia.

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The year 2020 was not a particularly bad year for the Australian economy like it was for the rest of the world. While most countries suffered waves of contagion, Australia closed its borders quickly and momentarily avoided the worst of the pandemic. However, the country could not be forever closed and, after a year, opened the borders with neighboring New Zealand. Nevertheless, the virus managed to enter the country, and currently, the daily cases of Covid exceed 200. This figure does not seem to be very high for a country like Australia’s magnitude. Still, the biggest problem right now lies in the low immunization rate of the Australian population. Since the beginning of this wave of infections in the country, the government has implemented regional blockades that have seriously affected the economy and, therefore, the Australian Dollar’s price.

On the US side, the Fed gave disappointing announcements on Wednesday. As expected, the interest rate remained at 0 – 0.25%, and, according to the Fed Chair, it will remain so until significant progress is made in the economy.

The US Dollar took another hit after preliminary estimates of GDP growth for the second quarter were released. After 8.5% was estimated, the preliminary estimate showed a growth of only 6.5%. Additionally, the initial unemployment claims were 400,000.

This disappointing outlook for the US economy kept the Australian Dollar safe from falling further.

Upcoming events

The most important release for the US economy next week will be the unemployment rate. For its part, Australia will start the week by publishing the inflation data. An important event is RBA’s statement that can potentially impact the pair’s trend. Throughout the week, the country will release its June retail sales balance.

The US NFP data due on Friday is also quite significant as the Fed also gauges employment data as a key for the monetary policy. The report is expected to reveal 925k jobs for July.

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AUD/USD technical analysis: Downward trend to continue

It is no surprise that the AUD/USD pair is in a downtrend. The price level develops below the 20-day SMA while the technical indicators remain at negative levels. The support levels to take into account are at 0.7290. In case of exceeding that, the next support level is 0.7220. On the other hand, the resistance levels are at 0.7440 and the round number 0.7500.

AUD/USD weekly analysis on daily chart
AUD/USD weekly analysis on daily chart

AUD/USD next week forecast

A price close to 0.7335 is expected for next week following the expected downtrend. However, both the weekly and monthly moving averages maintain their strong bearish momentum, so the price may continue to decline further.

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