Key Points:
- Bearish channel is now evident.
- Downside could be somewhat limited early in the week.
- EMA crossover should see losses continue moving forward.
The Aussie dollar was somewhat neutral throughout the week and the pair moved generally in sync with the relatively mixed fundamental results. However, like much of the market, the AUD experienced a massive spike in volatility and a subsequent sharp downturn in the wake of Jackson Hole.
As for the coming week, aside from the US employment data, the Australian Building Approvals and Commodity Prices results will be worth keeping an eye on.
The Aussie dollar remained relatively sedate throughout last week and ranged between the 0.7643 and 0.7588 levels. The pair’s movements reflected a lack of consensus which resulted from the mixture of fundamental results.
However, the real excitement happened on Friday where the AUD reached as high as 0.7691 before plunging lower as a result of Yellen’s cautious optimism surrounding the chances of a September rate hike. Additionally, an on target US Preliminary GDP result of 1.1% saw the pair remain under heavy pressure until the session closed.
On the technical front, the Aussie dollar is looking relatively well constrained by the bearish channel despite Friday’s large tumble. However, now that the pair is in such close proximity to the downside constraint and the 0.7535 support, further bearishness could be somewhat suppressed in the early stages of the week.
Despite this, the overall bias for the pair is bearish, especially given the recent crossover of the 12 and 20 day EMA’s. Although, it is worth noting that the 100 day EMA could limit the extent of this week’s losses if it supplies dynamic support going forward.
As for the coming week’s fundamentals, the US employment data will influence the AUD strongly but a number of Australian figures are also worth watching closely. Namely, the Building Approvals result is due early on in the week and will be in focus as it is expected to show an uptick this time around.
Additionally, RBA Assistant Governor Debelle will be making an announcement which could see some significant jawboning occur. Finally, Thursday will see the Australian Commodity Prices data released which could also impact the pair significantly.
Ultimately, the AUD’s technical and fundamental bias remains firmly bearish so we can expect to see the pair test the 0.7535 level and beyond in the coming weeks. However, don’t expect to see another major slip early on this week in the absence of a substantial fundamental upset. In fact, we might even see a small stint of bullishness in the coming session as the dust settles in the wake of Jackson Hole.