Event packed week ahead will be critical for AUD USD

The week ahead will be jam-packed with key macro events affecting currency markets. Chief among these major events will be the US jobs report for July; a slew of PMI numbers from the US, UK, and Eurozone countries; and critical central bank decisions from the Bank of England (BoE) and Reserve Bank of Australia (RBA). With next Friday’s US jobs report and Tuesday’s RBA decision on the schedule, the week ahead will be of particular importance for the AUD/USD currency pair.

First up will be the Reserve Bank of Australia. Although the central bank is mostly expected to keep its cash rate steady at 1.5%, there have been recent indications that the RBA may be becoming more hawkish in-line with other major central banks, and could be preparing to raise interest rates at some point in the foreseeable future. Some bets are being made that such a hike could occur as early as next week. This hawkish RBA shift is in sharp contrast with the US Federal Reserve, which issued yet another wait-and-see statement with respect to interest rates and balance sheet reduction this past week that simply served to prolong the prevailing environment of dovish uncertainty. Though the US dollar rebounded on Thursday, Friday saw the greenback come under heavy pressure once again.

This contrast between a more hawkish RBA and less hawkish Fed has helped push AUD/USD into a sharp incline that has been in place for the past two months. Most recently, this climb has culminated in a key shooting star candlestick pattern around the 0.8000 psychological resistance level. A daily candle with a long upper shadow (wick) and small lower body, this shooting star pattern suggests some potential exhaustion near a key resistance level.

Whether AUD/USD adheres to this downside reversal pattern or not will depend largely on what happens next week with the RBA and, to a somewhat lesser extent, the US jobs report. An unexpected RBA rate hike would likely result in a substantial up-move for the currency pair, potentially boosting it towards key upside resistance targets at 0.8100 and 0.8300. The more likely scenario, however, is that there is no rate hike. If that is indeed the case, since much of the RBA’s new-found hawkishness and the Fed’s continued dovishness have already been priced-in to AUD/USD’s recent rise, the shooting star reversal pattern could indicate an impending pullback. Any such pullback that makes a sustained breakdown below the 0.7900 level could trigger a substantial move back down towards the key 0.7750 support level.

StoneX Financial Ltd (trading as "FOREX.com") is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, FOREX.com does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date.

This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it. No opinion given in this material constitutes a recommendation by FOREX.com or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although FOREX.com is not specifically prevented from dealing before providing this material, FOREX.com does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Financial Ltd. StoneX Financial Ltd is a company incorporated in England and Wales with UK Companies House number 05616586 and with its registered office at 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is authorised and regulated by the Financial Conduct Authority in the UK, with FCA Register Number: 446717.

FOREX.com is a trademark of StoneX Financial Ltd . This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy. FOREX.com products and services are not intended for Belgium residents.