- US business activity fell in August as the manufacturing sector shrank.
- Powell confirmed that the Fed is likely to cut rates in September.
- Next week, investors will focus on US core durable goods orders and gross domestic product.
AUD/USD weekly forecast is bullish. The Australian dollar strengthened against the greenback after Powell confirmed a rate cut in September.
AUD/USD Ups and Downs
The Aussie had a bullish week as the dollar fell amid rising expectations of a Fed rate cut. Fed minutes on Wednesday revealed that some policymakers were confident enough to start cutting interest rates at the last meeting. However, the majority decided to hold on and wait for September. Moreover, data during the week showed further weakness in the US economy. Business activity fell in August due to a reduction in the manufacturing sector. This slowdown was evidence that high interest rates are hurting demand.
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On Friday, the dollar fell sharply after Powell confirmed that the Fed was likely to cut rates in September. According to the Fed chairman, upside risks to inflation have declined, while downside risks to employment have increased.
Next week’s key events for AUD/USD
Next week, investors will focus on US core durable goods orders and gross domestic product. Base orders for durable goods will show the state of demand. The previous report showed a 6.6% drop in orders. However, economists forecast a 4.0% increase in orders this month.
Meanwhile, the GDP report will significantly shape the outlook for a Fed rate cut as it will show how the economy is faring. A growing economy will further ease recession fears and give the Fed time to gradually lower interest rates. On the other hand, a weak economy could encourage the Fed to consider more significant interest rate cuts, further weighing on the US dollar.
AUD/USD Weekly Technical Forecast: Bulls approaching resistance at 0.6700
On the technical side, the AUD/USD price formed a bullish candle after breaking above and retesting the key 0.6550 level. This is a sign that the bulls are in the lead. Moreover, the price is well above the 22-SMA, with the RSI almost overbought.
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However, the bulls are facing a solid resistance level at 0.6700. A break above will strengthen the bullish bias. Moreover, it will allow the price to return to the critical psychological level of 0.6800. On the other hand, if the level remains firm, the price could retest the 22-SMA before continuing its uptrend or breaking below.
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