AUD/USD forecast: Consumer sentiment, business confidence and Lowe’s speech in the spotlight

Anticipating key data and RBA Governor Lowe's speech

Under the duress of the RBA’s decision to hold rates steady and weak data from China early last week, the AUD/USD made a remarkable recovery on Friday, ending the week 0.5% higher at .6668.

The key events for the AUD/USD this week will be consumer and business confidence data as well as a speech by RBA Governor Lowe on Wednesday titled 'The Reserve Bank Review and Monetary Policy'.

Whilst the speech will likely focus on the potential impact of the Review on Monetary Policy, it will also be scrutinised for hints about what factors might prompt the RBA to act on its tightening bias next month and what factors might persuade the RBA to extend its pause.

Last month (June), the Westpac Consumer Sentiment index rose 0.2% to 79, albeit still near recessionary levels, as a significant rise in the minimum wage offset the surprise RBA interest rate hike and cost of living pressures.

The RBA’s decision last week to keep rates on hold at 4.1% will ensure a solid bounce this week based on a 9.4% rebound in April from 78.5 to 85.8 when the RBA last kept rates on hold.

The NAB Business Confidence survey should remain little changed in June at -4. However, given a still-tight labour market, softer PMI and the prospect of higher rates, a continued softening in business conditions is expected from 8 to 5.

The Australian interest rates market is pricing in a 92% chance of a 25bp RBA rate hike to 4.35% by September and is fully priced for two 25bp rate hikes by year-end.

AUD/USD technical analysis

The AUD/USD ended last week higher at .6688 (+0.50%) after a significant rebound on Friday as US non-farm payrolls increased less than anticipated, raising hopes of a cooling labour market.

Over the past fortnight, the AUD/USD has oscillated between .6600c and .6700c, with the upper resistance reinforced by the 200-day moving average at .6696. In the short term, whilst the AUD/USD remains below .6700c on a closing basis, we favour a retest of support at .6600/.6575.

We're mindful that should the AUD/USD rally above .6700c and hold above there for more than a day or two, it would likely see the AUD/USD extend the rally towards resistance at .6800/20.

In the medium term, after a false dip to the .6458 low in May and a false surge to the .6899 high in June, the AUD/USD appears to have returned to the safety of its multi-month .6575/.6820 range.

AUD/USD daily chart

• _{TradingView: the figures stated are as of July 10, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}