Currency Pair of the Week: AUD/USD

This week, AUD/USD traders need to be aware of a number of events!


There is much to discuss this week in terms of Australia and the US, which could cause some volatility in the currency pair.  The RBA meets this week and they are expected to leave rates unchanged at 0.25%.   At their last meeting on September 1st, policymakers noted that the recovery from the coronavirus is underway, however the it is likely to be uneven and bumpy.  This was shown in the August retail sales report released last week, which was -4% vs +3.2% in July.  The weak print was primarily due to the local lockdowns, such as in Victoria.  However, at the same time, the unemployment rate for August fell to 6.8% from 7.5% in July.  As a result of the uneven recovery, economists are looking for the central bank to “set the table” for the possibility of more stimulus at their next meeting.  The RBA will release their Financial Stability Review on Friday this week.  In addition, the Australian government is set to release the yearly budget on Wednesday, a day after the RBA meeting.  On Sunday, government officials said the budget will assume that there will be a vaccine for the coronavirus.  They also noted that the budget  will be heavily weighted towards jobs.

In the US, Donald Trump tested positive for the coronavirus and went to the hospital on Friday evening for mild symptoms.  Today, he is expected to be released and head back to the White House to quarantine.  Though the US Presidential elections are less than a month away, this shouldn’t affect his status as a candidate.  However, in some polls Joe Biden has opened his widest lead so far over Donald Trump.  With Donald Trump feeling better, will “risk-on” prevail in the markets?  This would likely show a weaker US Dollar (stronger AUD/USD) and a stronger stock market.  In addition, there are reports that Nancy Pelosi and Treasury Secretary Mnuchin are closing in on some kind of a fiscal stimulus package.  Although Democrats have refused to piecemeal a deal before, both sides apparently agreed on a package for the airline industry on Friday, asking major carriers to hold off layoffs.  If a deal is reached, it  would signal “risk-on” to the markets.

On a weekly timeframe, AUD/USD has held resistance at the 38.2% Fibonacci retracement level from the April 2018 highs to the March lows of this year near .7450.  The pair also held horizontal resistance near .7410 from the December 2018 highs.

Source: Tradingview, City Index

On a daily chart, price has moved lower off the previously mentioned resistance through the 50 Day Moving Average and the upward sloping trendline on September 22nd and bounced.  AUD/USD is currently at the 50% retracement from the highs of September 1st to the lows on September 25th near .7200.   Not only is price currently at the 50% retracement, but it is also at testing the underside of the previously broken trendline and the 50 Day Moving Average, which is .7207.  If price breaks above this level, bulls could take control and run it back up to the previous highs near .7400.  If the current resistance holds, AUD/USD could move lower to first support near .7080, then the September 25th lows near .7000.

Source: Tradingview, City Index

This week, AUD/USD traders need to be aware of a number of events, including the RBA meeting, Australian budget release,  the health of US President Trump, and the status of the US fiscal stimulus package.  Technically, the .7200 level is extremely important for the market.

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