Fundamental Analysis

AUD Bullishness Looking Poised To Extend

Typography

Key Points:

  • After a strong prior week, the AUD looks ready to extend gains.
  • Fundamentals were largely responsible for recent bullishness.
  • Technical bias is also rather bullish.

The Aussie Dollar performed rather well last week which came as a surprise to much of the market given the FOMC’s decision to raise rates. As a result, the question is now being raised, can we expect similar gains in the week ahead or will the bears move back into the driving seat? Fortunately, if we take a look into both the week that was and what is next on the agenda, we may be able to establish a bit of a bias.

Starting with last week, the Aussie Dollar shrugged off the news that the FOMC would be increasing rates by around 25bps last week which, in hindsight, isn’t entirely surprising given the broad pricing in of just such adecision. However, just prior to the announcement, a US Core Retail Sales result of -0.3% m/m was posted alongside disappointing CPI figures which also aided in keeping the pair bullish despite the hike. Combined with the fact that the Australian Jobless Rate slipped to 5.5% in the subsequent session, it is actually little wonder that buying pressure remained in place throughout the rest of the week, ultimately, seeing the pair close all the way up at the 0.7618 handle.

However, what about the week ahead? Well, there isn’t a huge amount of Aussie news available which will mean that the US data is largely going to be driving prices for the pair. Nevertheless, the Australian HPI figure is due out early on and is forecasted at around the 2.2% mark which could be worth watching out for. If we see the forecasted result realised, it could set the AUD up for another solid week of gains. However, any real upside potential will be beholden to the US data which is due to posted in much greater volume. Of these postings, the Existing Home Sales and New Home Sales numbers are the two key prints to watch – the latter of which is expected to improve to 600K this time around. Such an uptick might see early gains moderated away as the week draws to a close, potentially leading to a rather flat week overall.

As for the technical front, the AUD is generally bullish but we are beginning to run into some resistance as a result of the pair moving into overbought territory. More precisely, the 12, 20, and 100 day moving averages transitioned into their most bullish configuration last week which is typically a strong signal for additional gains. Furthermore, the Parabolic SAR reinforces this bias as it remains significantly below price action and is in little danger of inverting anytime soon. The one fly in the ointment is the fact that both stochastics and RSI are now overbought which could put a dampener on any further rallies that might be on the cards.

Ultimately, there seems to be some consensus forming that further gains are indeed possible for the AUDUSD but these are likely to be attained at a reduced pace. Nevertheless, this will largely be dependent on the fundamental side of things coming in better than expected as, despite their clear bias, the technicals are unlikely to have the clout to keep the pair rallying on their own.

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Blackwell Global
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The report provided by Blackwell Global Investments Limited ("Blackwell Global") is meant for informative reading and should not be relied upon as a substitute for extensive independent research . The information and opinions presented do not take into account any particular individual's investment objectives, financial situation, or needs, and hence does not constitute as an advice or a recommendation with respect to any investment product. All investors should seek advice from certified financial advisors based on their unique situation before making any investment decisions and should tailor the trade size and leverage of their trading to their personal risk appetite.
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