Weekly Analysis and Recommendation: The AUD/USD ended the week with a potentially bullish closing price reversal bottom. The chart pattern doesn’t mean
The AUD/USD ended the week with a potentially bullish closing price reversal bottom. The chart pattern doesn’t mean the trend is getting ready to turn up, but may simply indicate the market ran out of sellers after this prolonged move down in terms of price and time.
Profit-taking and short-covering after the release of the Fed statement on July 29 and ahead of this week’s Reserve Bank of Australia monetary policy statement were likely the catalysts behind the reversal.
On Tuesday, August 4, the RBA is expected to leave its benchmark interest rate at 2.00%. However, the statement may contain language which suggests the central bank may implement two additional rate cuts before the end of the year. Even if the central bank refrains from a rate hike, dovish guidance could put pressure on the market.
Low commodity prices and a sluggish Chinese economy are two factors weighing on the Australian Dollar. However, the major reason why this Forex pair is likely to continue to weaken over the long-term is the interest rate differential between Australian and U.S bonds as well as the divergence between Fed and RBA monetary policies.
One can build a bullish scenario this week if the RBA statement is on the hawkish side. This means that if it eliminates the threat of additional rate cuts. Friday’s U.S. Non-Farm Payrolls report will also influence the price action. Traders are pricing in an increase of 224K new jobs in July. A miss to the downside may take a September rate hike by the Fed off the table. This news will trigger a short-covering rally by the AUD/USD. A bigger-than-expected number will likely trigger the resumption of the down trend.
FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports.
Important Reports to Watch this Week:
Date Time Curr Event Forecast Previous
Mon Aug 3 |
10:00am ET |
USD |
ISM Manufacturing PMI |
53.6 |
53.5 |
||||
9:30pm ET |
AUD |
Retail Sales m/m |
0.5% |
0.3% |
|||||
AUD |
Trade Balance |
-3.06B |
-2.75B |
||||||
Tue Aug 4 |
12:30am ET |
AUD |
Cash Rate |
2.00% |
2.00% |
||||
AUD |
RBA Rate Statement |
||||||||
Wed Aug 5 |
8:15am ET |
USD |
ADP Non-Farm Employment Change |
218K |
237K |
||||
8:30am ET |
USD |
Trade Balance |
-42.6B |
-41.9B |
|||||
10:00am ET |
USD |
ISM Non-Manufacturing PMI |
56.4 |
56.0 |
|||||
9:30pm ET |
AUD |
Employment Change |
12.5K |
7.3K |
|||||
AUD |
Unemployment Rate |
6.1% |
6.0% |
||||||
Thu Aug 6 |
8:30am ET |
USD |
Unemployment Claims |
269K |
267K |
||||
9:30pm ET |
AUD |
RBA Monetary Policy Statement |
|||||||
Fri Aug 7 |
8:30am ET |
USD |
Non-Farm Employment Change |
224K |
223K |
||||
USD |
Unemployment Rate |
5.3% |
5.3% |
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.