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AUD/USD Forecast August 19-23 – Will RBA minutes shake up the sleepy Aussie?

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AUD/USD showed little movement for a second successive week. The upcoming week has just two events, with the RBA minutes in the spotlight. Here is an outlook at the highlights and an updated technical analysis for AUD/USD.
Australian key indicators were impressive last week, but it wasn’t enough to push the Aussie higher. The business and consumer sectors both showed higher confidence levels. The NAB Business Confidence improved to 4 in July, up from 2 in the previous release. The Westpac Consumer Sentiment jumped 3.6% in August, its highest gain since February. Wage growth hit 0.6% in June, above the forecast of 0.5%. The week ended with a sparkling employment report, as the economy created 41.1 thousand in July, after a negligible gain of

In the U.S., there was positive news from consumer inflation and spending numbers. CPI climbed 0.3% in July, matching the forecast. Core CPI remained steady at 0.3%, beating the forecast of 0.2%. Retail sales rose 0.7%, easily beating the estimate of 0.4%. Core retail sales sparkled with a gain of 1.0%, its best showing since March. On the manufacturing front, the Philly Fed Manufacturing Index slowed to 16.8, but still beat the estimate of 10.1.

President Trump announced a delay on new U.S. tariffs against China, which were set to take effect on September 1. Although the delay is welcome news, a trade agreement between the two countries remains elusive, and further tensions seem likely.
AUD/USD daily graph with support and resistance lines on it. Click to enlarge:
  1. RBA Monetary Policy Meeting Minutes: Tuesday, 1:30. The minutes provide details of the RBA meeting earlier this month. At the meeting, the RBA held the benchmark rate at an even 1.0%. RBA Governor Philip Lowe noted concerns about global trade tensions as well as soft spots in the domestic economy. Will the minutes reiterate these concerns?
  2. MI Leading Index: Wednesday, 0:30. The Melbourne Institute’s composite indicator is based on nine economic figures, mostly published. Nevertheless, it provides a good overview of the economy. The indicator has been steady, posting three straight declines of 0.1%.

*All times are GMT

Technical lines from top to bottom:

We start with resistance at 0.7165. This line has held 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 is next.

0.6825 (mentioned last week) is the next resistance line. It was under pressure last week.

0.6744 remains relevant. It was tested in support during the week and remains a weak support level.

0.6686 was a cap back in January 2000.

0.6627 has held in support since March 2009. 0.6532 is next.

0.6456 follows.

0.6341 has held in support since 2003.

I remain bearish on AUD/USD

Trade tensions remain high between the U.S. and China, which has soured investor risk appetite. Domestically, the economy is struggling, and fears of a recession in the U.S. sent the stock market sharply lower. This means that risk currencies like the Aussie could be in for a rough 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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