Key Points:
- Last week’s fundamentals could set the pair up for further gains.
- Technicals remain bullish despite the pair cooling off last week.
- Any rally will likely be more sedate than those seen recently.
After a rather dicey week, it’s worth taking stock of what exactly happened to the AUD and what this could mean moving ahead. Additionally, we should look at what news is worth keeping an eye on in the wake of the drop in unemployment to 5.7% and also how this fits in with the technical forecast.
The Aussie Dollar was under heavy selling pressure straight out of the gate last week, sinking around 40 pips despite a lack of economic news. However, things soon turned around in the subsequent session, the pair surging strongly higher as the NAB Business Confidence and Westpac Consumer Sentiment figures came in at 10 and 2.3% respectively.
However, despite building on this bullishness following the Flynn drama and Trump’s Press debacle, the AUD moderated and fell back to where it opened the week. This came as somewhat of a surprise given that the Australian Unemployment Rate had dropped to 5.7% during Friday’s session. Regardless, now that the pair has cooled off slightly, the result means that the AUD/USD should be well positioned to make another move higher which is largely reflected in the technical bias.
Specifically, the AUD retains its strong bullish bias even though it appears to be slowing its ascent to a significant degree. Notably, the 12, 20, and 100 day moving averages are effectively as bullish as they can be with little chance of becoming bearish in the near-term. In addition, the Parabolic SAR and ADX readings are highly suggestive of the uptrend continuing moving ahead. However, the constant threat of becoming overbought is providing some resistance which could see this bullish phase slow substantially moving on and this is worth keeping in mind.
As for what lies ahead in the news, the RBA will be in focus given that we have the monetary policy meeting minutes due to be posted and two speaking engagements from deputy governor Lowe. However, the Cash Earnings data will also be worth keeping a close eye on. This is predominantly because it could help to build on any positive sentiment still in the wings following the drop in the Unemployment rate that we saw last week. This being said, also monitor the US Existing Home Sales figures due around the same time as they could moderate the day’s performance.
Ultimately, we could have quite a good week lying ahead of us for the Aussie Dollar if everything goes according to plan. However, as we live in the age of Trump, it may be best to keep half an eye on the white house just in case of any further political bombshells.