AUD/USD Weekly Projected: Risking A Resumption Of Drop To New 2021 Lows

The AUD/USD pair dipped to 0.6992, its lowest level since November 1, but ended the week with gains in the 0.7160 range.

The pair profited from the weakening of the US Dollar following the Federal Reserve’s decision on Wednesday and positive Australian employment numbers.

The Fed delivered as predicted, and the absence of news benefited markets, which rose to the Dollar’s detriment.

The Fed kept rates steady but increased its tapering objective to $30 billion per month beginning in January 2022. This implies the Fed will stop purchasing $20 billion in Treasuries and $10 billion in Mortgage-Backed Securities each month and raise interest rates sooner.

The Fed’s dot-plot predicts three rate increases in 2022, followed by three more in 2023. Furthermore, the monetary authority raised its inflation predictions for 2021 and 2022 to 5.6% and 2.6%, respectively, from 4.2% and 2.2% before.

The GDP is now expected to increase by 4% in 2022, an increase from the original median prediction of 3.8%, while the economy is expected to grow by 2.2% in 2023, down from 2.5% in September.

Australia’s Recovery Is Gaining Traction

Australia revealed on Thursday that it created 366.1K new jobs in November, well above the 200K predicted. The unemployment rate fell to 4.6%, while the participation rate increased to 66.1%, both of which exceeded forecasts and pointed to a stronger-than-expected economic recovery.

The pair reached 0.7223, its best level in almost a month, but the impetus dissipated after that, as markets fell on Friday, bringing the AUD/USD down with them.

Meanwhile, Australia released the December Commonwealth Bank Manufacturing PMIs, higher than expected but lower than November figures.

In the United States, the Producer Price Index increased by 9.6% year-on-year in November, while Retail Sales increased by a more moderate 0.3%.

In Europe, the German IFO Business Climate fell to 94.7 in December, while the EU Consumer Price Index remained unchanged at 2.6% year on year in November.

The following week will be sparse on statistics, with the US releasing the final reading of its Q3 GDP and November Durable Goods Orders and the EU releasing December Consumer Confidence.

The December Westpac Leading Index and November Retail Sales will be released in Australia.

Technical Analysis Of The AUD/USD

AUD/USD CHART Source: Tradingview.com

The AUD/USD pair has continued its earlier rebound up to the 38.2% retracement of the 0.7555/0.6992 loss at about 0.7210 and is presently trading above the 23.6% breakdown of the same fall 0.7125, the nearest support level.

The weekly chart reveals that the risk is still tilted to the downside, as AUD/USD encountered sellers near its 100 SMA even while receding from the stated Fibonacci milestone.

Chart patterns remain directionless inside negative ranges, suggesting that another leg south is possible. The daily chart’s technical indicators strengthen the argument for a bearish run ahead. 

The AUD/USD pair is just clinging above a bearish 20 SMA while chart patterns have gone downward, with the momentum hovering around its midpoint and the RSI now below zero.

Additional increases towards 0.7300 are probable after the indicated weekly high is breached, but a steady rise is out of the question for the time being. If the pair breaks below 0.7125, it may fall to 0.770 first and then to 0.6990.