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AUD/USD Forecast September 21-25 – Aussie remains flat after RBA minutes, Fed decisions

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For a second straight week, AUD/USD showed little movement. The upcoming week has two events. Here is an outlook at the highlights and an updated technical analysis for AUD/USD.

The RBA minutes noted that Covid-19 had caused a severe downturn in the economy, but nevertheless the economy was showing signs of recovery. Employment numbers sparkled in August. The economy created 111.0 thousand jobs, defying the forecast of -40.0 thousand. As well, the unemployment rate fell to 6.8%, down sharply from 7.5%.

In the US, the highlight was the Federal Reserve policy meeting. As expected, the Fed kept interest rates close to zero. Of more interest to investors was the Fed message that it will not raise rates before 2023, under its new inflation target, which allows inflation to overshoot 2% without triggering a rate hike.

US retail sales slowed significantly in August. The headline reading dropped to 0.6%, down from 1.2%. Core retails sales came in at 0.7%, down sharply from 1.9%. This points to weakness in consumer spending, which is a key driver of economic growth.

AUD/USD daily chart with support and resistance lines on it. Click to enlarge:
  1. Manufacturing PMI: Tuesday, 23:00. Manufacturing has improved, as the PMI has posted two consecutive readings above the 50 level, which separates contraction from expansion. In August, the PMI rose to 53.9 up from 53.3 beforehand. We now await the September data.
  2. Services PMI: Tuesday, 23:00. The index slipped badly in July, falling from 58.5 to 48.1 points. Will the index push back into expansion territory in September?

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AUD/USD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 0.7595.

0.7513 has held since June 2018.

0.7392 is next.

0.7294 (mentioned last week) remains an immediate resistance line.

The round number of 0.7200 is the first support level.

0.7087 is next.

0.7008, which is protecting the symbolic 0.7000 line is the final support level for now.

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I am bullish on AUD/USD

Investors have been bullish on the Aussie, despite the Covid-19 pandemic and its status as a risk currency, With the US battling Covid and a fiscal stimulus package stuck in Congress,  AUD/USD could post gains this week.

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AUD/USD forecast and technical analysis ► preview of the major events that will move the Australian Dollar (A$) in the upcoming week.  Here are some general data. Scroll down for the latest AUD/USD outlook

Aussie/USD characteristics

The Aussie is a “risk-on” currency. It usually rises when commodities and stocks advance and when the risk appetite improves. Its fate deteriorates when the markets are in “risk aversion” mode: geopolitical worries increase and the outlook for global demand is sluggish.

The Aussie’s technical behavior is usually admirable. This implies respecting lines of resistance and support, diagonal trend lines, etc. AUD/USD has become more popular for techies in recent years, even after the financial crisis which brought the famous “carry trade.” to a halt.

Australia exports metals such as copper and iron. We often find a positive correlation between the price of iron ore and the Aussie $. The mining boom kept Australia out of recession for over 25 years. The land down under enjoyed the high resources demand with China playing a key role. While peak investment is probably behind us, the sector still churns out quite a lot of raw materials, as China has a soft landing.

AUD/USD Recent Moves

The Reserve Bank of Australia clarified it will not change interest rates anytime soon, but they tend to lean to cutting rates. This is due to low inflation. The labor market was looking good early in the year but now looks more complicated.

Risks could arise from the Chinese economy: Australia’s No. 1 trading partner could see a slowdown after the Party Congress in October 2017. So far, things look stable, but 2018 could be different.

Latest weekly AUD/USD forecast

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