AUD/USD Weekly Forecast: Fundamentals point the aussie lower – FXStreet

The AUD/USD lost groundfor the third week in a row, pummeled by broad US dollar strength and a return of the COVID risk aversion trade.Austria instituted a partial lockdown and Germany contemplateda return to restrictions amid rising case counts that defyhigh vaccination rates in both countries.

A potential rate divergence surfaced with the US Federal Reserve moving towards rate hikes in 2022 and the Reserve Bank of Australia (RBA) expecting none. On Tuesday, RBA Governor Philip Lowe noted that "the economy and inflation would have to turn out very differently from our central scenario for the Board to consider an increase in interest rates next year."

Chinese property market woes continued with negative implications for the mainland and Australias resource based economy. The US rating agencies Moodys and S&P expressed concern about the status of China Evergrande Group, with the latter considering a default highly likely at some point.

The AUD/USD fall was contained on Friday by the upward support line at 0.7240 that extends back to late August but the pair has lost 3.4% this month and 1.2% this week.

Australian economic information provided little this week to counter the strong results from the US.

The excellent US Retail Sales report combined with a Consumer Price Index (CPI) at its highest level since 1990, should keep the Fed on track to end its $120 billion bond buying program on schedule by June 2022. Evidence of a strengthening recovery may be sufficient for the Federal Open Market Committee (FOMC) to advance its taper timetable at the December 15 meeting.

Fundamental and technical factors do not favor the aussie. While higher US interest rates are mostly speculative, the Fed is officially behind ending its emergency interventions and has projected at least one fed funds hike. Meanwhile, Governor Lowes prediction weighs on the aussie.

The US economy appears to be accelerating in the fourth quarter after a weak 2% performance in the third. The Atlanta Fed GDPNow estimate for the final three months is currently running at 8.2%.

The US 10-year Treasury yield lost 6 basis points on Friday, largely on media notice that President Biden will announce the new Fed Chair this weekend. Current Chief Jerome Powell is considered the favorite but Governor Lael Brainard has been mentioned in the media as a long-shot. She is generally thought to be a bit more dovish hence the drop in Treasury rates.

With the AUD/USD resting on weak support, the 2021 low at 0.7130 from August should be in play with Septembers bottom at 0.7174 an interim stop.

Australian Retail Sales for October due on Friday will not change the economic scenario.

American information is heavily loaded on Wednesday before the Thanksgiving holiday on Thursday. Durable Goods Orders for October should confirm the excellent Retail Sales release. The first revision to third quarter GDP may offer a slight improvement. Better results will support the dollar.

The bias in the AUD/USD is lower with scant support ahead of the years low.

FXStreet

FXStreet

FXStreet

FXStreet

The MACD (Moving Average Convergence Divergence) cross of the signal line on November 2 remains the dominanttechnical condition. The steady differential between the two lines indicates a negative tendency.The Relative Strength Index (RSI) has moved lower sinceNovember 12 but has not entered oversold status suggesting there are more losses ahead.

Thenearly conjoined 50-day moving average (MA) at 0.7354 and the 100-day MA at 0.7358 bracketedby resistance lines at 0.7350 and 0.7380 make a formidable 30 point band.The prevalence of resistance over support and the greater spacing beneath theFriday close indicate weakness to the September low at 0.7174 and the August and 2021 bottom at 0.7130.

Resistance: 0.7280, 0.7300, 0.7350 (0.7354 50-day MA, 0.7358 100-day MA), 0.7380

Support: 0.7240, 0.7225, 0.7175, 0.7130

The FXStreet Forecast Pollis bearish but expects the September low at 0.7174 to hold.

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AUD/USD Weekly Forecast: Fundamentals point the aussie lower - FXStreet