Fundamental Analysis of AUD/USD for February 27, 2019

AUD/USD has been trading at the edge of 0.7200 area for a few days. This level is being tested and rejected by the bulls.

Today Australia's Construction Work Done report was published with a slight increase to -3.1% from the previous value of -3.6%, much weaker than the forecast of a 0.6% gain. Construction spending in Australia took a surprise spill last quarter with a disappointing reeading which indicates that the Australian economy is currently facing some headwinds. The value is the lowest since 2017 and such downside risk is expected to affect the GDP forecast for the year. According to Westpac Senior economist Andrew Hanlan, bottlenecks are a constraint or it may have been weather disruption. The Reserve Bank of Australia presented a bearish outlook for the domestic economy that might lead to 2 rate cuts this year which would lead to further AUD weakness.

Tomorrow Australia's Private Capital Expenditure report is going to be published which is expected to increase to 0.8% from the previous value of -0.5% and Private Sector Credit is expected to increase to 0.3% from the previous value of 0.2%. Both economic reports could reveal positive readings which may encourage strength for AUD. However, any worse print is expected to weaken AUD momentum.

On the other hand, yesterday during FED Chair Powell's testimony, he stated that the Federal Reserve is in no rush to hike the rate soon despite recent downbeat economic data. Citing Powell, the US economy is on a sound footing and monetary tigthening would turn things upside down. The overall outlook of the economy is closely being monitored and the FED is going to be quite patient with further rate hikes.

Additionally, CB Consumer Confidence report was published recently with an increase to 131.4 from the previous figure of 121.7 which was expected to be at 124.8 and Richmond Manufacturing Index also increased significantly to 16 from the previous figure of -2 which was expected to be at 6. Today FED's Chair Jeromy Powell is going to testify again. He is widely expected to speak with moderately hawkish rhetoric.

Meanwhile, AUD has been undermined by tepid economic reports and the scenario of rate cuts. These factors could hurt market sentiment on AUD. At the same time, USD found support from recent positive economic data and Powell's upbeat testimony. In this context, USD could gain momentum in the coming days.

Now let us look at the technical view. The price is currently trading below 0.7200 area after certain retest earlier. Though the price is being carried by the dynamic level of 20 EMA to push higher, Bearish Divergence is also observed in the process. As the price remains below 0.7200 area with a daily close today, further bearish pressure is expected. Otherwise, a daily close above 0.7200 is expected to lead to strong bullish momentum in the future.

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The material has been provided by InstaForex Company - www.instaforex.com

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