Key Points:
- Last week has set the pair up for potentially substantial losses.
- Falling wedge is now becoming apparent.
- Retail Sales data now in focus for the week ahead.
The AUD moved largely in step with market sentiment last week and this has set it up for a potentially bearish period moving forward. Specifically, the pair’s price action is suggestive of a rather steep falling wedge structure which could see losses begin to accumulate moving ahead. However, it is important not to neglect the fundamental bias as we look ahead as there could be a few key things to watch out for this week.
Starting with last week’s performance, the Aussie dollar managed to resist the effects of Monday’s broadly stronger US Manufacturing results to a significant degree, largely due to the Australian Commodity Prices figure of 45.5% y/y. However, the data also primed the pair to seize on the shift in sentiment away from the US dollar which occurred mid-week. Moreover, a subsequent Australian Trade Balance of 1.24B mitigated the fallout of Friday’s resurgent USD which saw the pair hold on to the majority of the week’s hard won gains.
On the technical front, the AUD’s declining price action seems to be narrowing and forming a loose falling wedge structure. As a result, we are expecting to see some more bearishness for the pair in the near-term, even if there is likely to be some correction to the upside in the immediate future. This continued decline would be in line with the EMA bias and the general tone of the last few weeks of Australian fundamental data. However, the relative neutrality of the RSI leaves the pair with some options which could allow an upside breakout to eventuate if a sizable fundamental upset occurs in the coming week.
As for said fundamentals in the week ahead, both the Australian and US Retail Sales result are due to be released which could see some volatility occur during the Tuesday and Friday sessions accordingly. This being said, the two figures are forecasted to show some solid improvement which could see them largely offset one another in the absence of some stronger supporting data. As a result, also keep half an eye on the Australian Job Vacancies and the US PPI figures which are due out on Wednesday and Friday respectively.