AUD/USD Weekly Forecast: RBA/Fed Embrace Hawkish Stances

• The RBA’s top policymaker warned that the bank could still hike rates to lower inflation.

• Traders are adjusting their policy outlooks for the RBA and the Fed.

• Market participants eagerly await the US inflation report.

The AUD/USD weekly forecast takes on a neutral tone. This equilibrium comes from hawkish remarks echoed by both RBA and Fed policymakers.

Ups and downs of AUD/USD

Aussie fluctuated last week, with the Australian and US dollars showing strength. However, the week ended with the pair slightly up. The Australian dollar strengthened after the RBA policy meeting on Tuesday, where the central bank held rates. Moreover, the RBA’s top policymaker warned that the bank could still hike rates to lower inflation. 

RBA governor Michele Bullock repeated these hawkish remarks when she spoke on Friday, leading to a drop in rate cut bets. The same happened in the US, with more upbeat data and hawkish sentiments from Fed policymakers. Traders are adjusting their policy outlooks for the RBA and the Fed, with both likely to delay rate cuts.

Next week’s key events for AUD/USD

Next week, Australia will release data on employment. The last report showed a significant decline in employment in the country. Another such decline could raise bets on RBA rate cuts. On the other hand, the US will report on consumer and producer inflation. Additionally, there will be a report on retail sales. 

Market participants eagerly await the US inflation report because it will give clues on the Fed’s next policy move. Recent data from the country has dimmed expectations for early Fed rate cuts. Therefore, the inflation figure will determine whether early rate cuts are still possible.

AUD/USD weekly technical forecast: Bears pause at the 0.618 fib retracement

On the technical side, AUD/USD is in a downtrend after a sharp reversal at the 0.6870 level. The price fell from this level with solid bearish momentum, breaking below the 22-SMA. Consequently, there was a sudden shift in sentiment from bullish to bearish.

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Moreover, the price started making lower lows and lower highs. However, this decline has paused after retracing 0.618 of the previous bullish move. This key fib level might lead to a pullback to retest the 22-SMA or consolidation before the downtrend continues.

Still, the bearish bias is strong, and the price will likely break below the fib level. If this happens, it might fall to the 0.6301 level.

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