AUD/USD Forecast: Sharp Losses Likely Below 0.77, No Clear Seasonal Trend

The Aussie-Dollar pair fell to 0.7799 last week; the lowest level since mid-July, pushing the 14-day RSI into bearish territory. Hawkish comments from Fed's Yellen strengthened the bid tone around the US dollar, while the unwinding of safe-haven longs in Gold weighed over the Aussie.

RBA policymakers attempted jawboning throughout last month. However, the Aussie wobbled only after the Fed surprised with the hawkish dot plot chart and Yellen's comments in the preceding week hinted that Fed is no longer data dependent and is hell-bent on unwinding the ultra-easy monetary policy.

Economic Calendar

Tuesday - 00:30GMT - HIA New Home Sales & Building Permits and 03:30GMT - RBA rate decision

The data released earlier today showed Sydney prices fell for the first time in 17 months. The housing market in Australia continues to lose steam. Hence, an uptick in the Home Sales and Building Permits would be a positive surprise and could lift the Aussie dollar.

Meanwhile, the case for a rise in the Reserve Bank cash rate is building, but academics don't expect it to occur when the central bank board meets on Tuesday. The central bank would want to see the growing tightness in the labor market spill over into higher wages. The Reserve Bank holds its October meeting tomorrow, with money markets predicting a 100 percent probability that the cash rate will remain steady at the historic low of 1.5 percent. The central bank is likely to sound cautiously optimistic and ensure the Aussie remains weak.

Thursday - Retail Sales and Trade Balance at 01:30GMT

Retail sales are seen rebounding 0.3% m/m in August and the trade surplus is seen widening to 875M from the previous figure of 460M. Better-than-expected numbers could strengthen the bid tone around the Aussie dollar.

Friday - US wage growth figure at 12:30 GMT

The odds of a December Fed rate hike rose to 70% last week. No wonder, the USD is well bid across the board. However, the tables may turn in favor of the Aussie if Friday's wage growth numbers miss estimates by a 'big' margin.

Technicals - Eyes 0.7740

Weekly chart

• Failure to hold above the downward sloping weekly 200-MA is bearish, however, the job is half done. The former resistance turned strong support region of 0.7740-0.77 (marked by circles) is yet to be put to test.
• Only a weekly close below 0.77 would signal the rally from the Feb 2016 low of 0.6827 has topped out.
• The 14-day RSI is below 50.00 [bearish territory], sloping downwards and well short of the oversold territory.
• A corrective rally above the downward sloping 10-DMA is likely to be short-lived.

No clear seasonal trend

The performance of the AUD/USD pair in the fourth quarter over the years [since 1987] has been mixed.