AUD/USD Weekly Forecast: Bulls Eye $0.6750 on Softer US CPI Report
It is a busy week for the AUD/USD, with economic indicators from Australia, China, and the RBA in the spotlight.
On Tuesday, investor attention will turn to business and consumer confidence numbers. With the RBA highlighting concerns about the impact of interest rate hikes on households, waning consumer confidence would further support an RBA pause.
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February employment figures will likely have more influence, however. An unexpected fall in employment and weaker consumer confidence numbers would send a gloomy outlook. For investors wanting to assess the RBA views on the economy, the RBA Bulletin will need consideration on Thursday.
Beyond the numbers from Australia, economic data from China will also provide the AUD/USD with direction. Industrial production, retail sales, and unemployment numbers would give investors a sense of how the economy is performing in the post-zero-COVID policy era.
Following the hotter-than-expected private sector PMI numbers for February, this week’s numbers would support a more bullish outlook for the China economy.
Last week, the Aussie Dollar tumbled by 2.86% to $0.65814. Fed Chair Powell sent the Aussie to sub-$0.66 levels for the first time since November. The Aussie Dollar failed to claw back the losses on Friday despite softer US wage growth figures and a higher US unemployment rate.
Mixed signals from RBA Governor Philip Lowe contributed to the bearish week, with Lowe floating the idea of pausing on raising interest rates.
Regarding pausing rate hikes, Lowe reportedly said,
“With monetary policy in restrictive territory, we are closer to the point where it will be appropriate to pause interest rates to allow more time to assess the state of the economy. At what point it will be appropriate to pause will be determined by the data and our assessment of the outlook.”
AUD/USD Technical Indicators
The AUD/USD needs to move through the $0.6640 pivot to target the First Major Resistance Level (R1) at $0.6716. A return to $0.67 would signal a bullish week. However, the Aussie Dollar would need softer US inflation numbers to support a breakout week.
In case of a breakout session, the Aussie would likely test resistance at the previous week’s high of $0.67751 but fall short of the Second Major Resistance Level (R2) at $0.6851. The Third Major Resistance Level (R3) sits at $0.7062.
Failure to move through the pivot would leave the First Major Support Level (S1) at $0.6506 in play. However, barring a risk-off-fueled sell-off, the AUD/USD pair should avoid sub-$0.64. The Second Major Support Level (S2) at $0.6430 should limit the downside.
The Third Major Support Level (S3) sits at $0.6219.
Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The AUD/USD sits below the 50-day EMA, currently at $0.66688. The 50-day EMA slid back from the 100-day EMA, with the 100-day EMA pulling back from the 200-day EMA, delivering bearish signals.
A move through the 50-day EMA ($0.66688) would support a breakout from R1 ($0.6716) to give the bulls a run at the 100-day EMA ($0.67372) and the last week’s high of $0.67751. A move through the 50-day EMA ($0.66688) would send a bullish signal.
However, failure to move through the 50-day EMA ($0.66688) would leave the Major Support Levels in play.
The US Week Ahead
Following mixed Fed Chair Powell signals and economic indicators from last week, the US CPI Report will draw interest on Tuesday. Sticky February numbers would drive bets of a 50-basis point interest rate hike in March and further hawkish moves going into the summer.
On Wednesday, US wholesale inflation and retail sales figures will also influence ahead of consumer sentiment numbers on Friday.
However, there are no FOMC member speeches to consider. The Fed entered the blackout period on Sunday.