This week was quite an eventful week as economic data releases were significant. In the previous AUD/USD forecast we noted that the strong support of 0.7 would likely present much buying demand. The Australian dollar remained pressured by the Chinese economic headwinds.
Looking at the AUD/USD weekly chart above we noted that the currency pair was bearish for the week. This is as per our proprietary Price Action Bias Signals. The strong support of 0.7 resisted the bearish incursion for now with the currency pair closing for the week right above it.
In the week ahead, it will be critical to observe the price action. The bearish momentum is notable but the region of 0.7 is likely to be a strong support. Sentiments will come into play as the stronger of either bulls or bears will influence the AUD/USD.
China Woes Continues
A survey of purchasing managers in China came in weaker than expected. Investors expect China to keep on steaming ahead the path of economic growth and hence any indication of a slow down will often result in a deterioration of sentiments. Towards the end of the week, the Chinese trade balance came in much lower than expected. It was reported to be 34B instead of the expected 257B. This likely depressed risk appetite and may have triggered risk aversion too. As a large trading partner of China, it is unlikely that Australia remains insulated from China’s economic situation.
A number of economic data released by Australia was worst than expected. Gross Domestic Product came in at 0.2% instead of 0.5% while Retail Sales came in at 0.1% instead of 0.3%. While the Reserve Bank of Australia left rates unchanged and remained neutral, there is growing speculation of a rate cut this year. As a lower interest may dampen the incentive to hold a currency, demand may fall.
It is going to be an economic data heavy week ahead. Besides releases by Australia and China, a number of critical numbers are expected to be released by the US too. This includes the Retail Sales, Consumer Price Index and Producer Price Index. The US Federal Reserve chair is also expected to speak on a few occasions.
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