Australian dollar forecast: AUD/USD faces a busy week ahead

Monday’s Asia-Pacific outlook

Asia-Pacific traders face a potentially volatile week, with several high-impact events ahead that may shift market sentiment. Equity indexes moved higher across US, European and APAC markets as the US dollar pulled back. The DXY Index fell for a second week, weighed down by an advancing yen, euro and Australian dollar.

The Australian dollar may see more gains this week if risk appetite holds up, although market sentiment has been fragile as traders continuously digest economic data, central bank commentary and other indicators. Later this week, Australia’s second-quarter inflation rate may lift AUD/USD if the data surprises to the upside. The Bloomberg consensus forecast sees a 6.3% year-over-year increase, up from 5.1%.

China’s property sector woes and its broader economic condition will likely continue to play a large part in influencing market sentiment. Hong Kong’s Financial Secretary Paul Chan wrote in a blog post over the weekend that Hong Kong’s financial situation is sound. Mr. Chan’s comments are in response to the large number of capital outflows seen over the last several months, causing some to speculate that the city’s monetary system may soon become illiquid.

Traders face a relatively light economic docket for today, but several potentially high-impact events loom. The United States will see a consumer confidence update and an advance read on second-quarter gross domestic product (GDP) growth. Those events may cause big shifts in the US dollar, which has broad-ranging potential to disrupt financial markets. Europe is also due for its Q2 GDP print to cross the wires.

Notable events for July 25

• Thailand – New Car Sales YoY (June)
• Thailand – Balance of Trade (June)
• Singapore – Core Inflation Rate YoY (June)
• Taiwan – Industrial Production YoY (June)

AUD/USD technical outlook

AUD/USD rose to its 50-day Simple Moving Average after prices pierced above wedge resistance. The price target, measured by the wedge’s height, suggests prices may continue rising. The 0.7000 level would help to put the cross back on a solid footing if prices can overtake the 50-day SMA. A pullback to the wedge is another possible outcome.

AUD/USD daily chart

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