• Business activity data showed expansion in the US manufacturing and services sectors.
• US GDP data came in higher than expected.
• Australia will release data on consumer inflation next week.

The AUD/USD weekly forecast is bearish as the resilient US economy has shifted the outlook, prompting a decrease in expectations for Fed rate cuts.

Ups and downs of AUD/USD

Aussie had a bearish week as the dollar strengthened due to upbeat data from the US. Last week, the US released business activity data showing expansion in the manufacturing and services sectors. Moreover, GDP data came in higher than expected, showing resilience in the US economy.

Additionally, this indicated that the Fed did not need to cut rates any time soon. As a result, the dollar strengthened, pushing AUD/USD lower. Meanwhile, the core PCE price index came in as expected.

Next week’s key events for AUD/USD

Australia will release data on consumer inflation next week. Meanwhile, the US will release figures on manufacturing and employment. Additionally, traders will get to review the Fed’s meeting minutes. This might give clues on what will come next for interest rates in the US.

The last report on inflation in Australia showed a sharp decline to a two-year low. Consequently, investors became convinced that the RBA was done raising rates.

Meanwhile, the crucial nonfarm payrolls report will show the state of the US labor market. A positive report might cause a drop in rate-cut bets and a rally in the dollar.

AUD/USD weekly technical forecast: Solid support stalls bearish momentum

On the charts, AUD/USD has fallen sharply after touching the 0.6850 resistance level. As a result, the bias has gone from bullish to bearish, with the price now trading below the 22-SMA. At the same time, the RSI has gone from trading near the overbought level to trading closer to the oversold region.

However, the new bearish momentum has paused at a solid support zone. The price is struggling at the 0.5 fib retracement level and the 0.6550 key support level. Price action shows indecision at the support zone with small-bodied candles and big wicks. This indecision might lead to a pullback to the 22-SMA or a break below the support zone.

Given the strong bearish bias, there is a bigger chance the price will break through the zone. If this happens, bears will be free to push the price lower to the 0.6351 support level.

https://www.forexcrunch.com/blog/2024/01/27/aud-usd-weekly-forecast-us-economy-shows-resilience/