COZfx: AUD/USD weekly outlook

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COZforex: The Australian dollar ended Friday’s session modestly higher against its US counterpart, following disappointing US data on new home sales, but expectations that the Federal Reserve will start to phase out stimulus this year continued to underpin dollar demand.

AUD/USD hit 0.9050 on Friday, the pair’s daily high; the pair subsequently consolidated at 0.9026 by close of trade on Friday, up 0.21% on the day but down 1.69% for the week. Coz forex senior derivatives trader Daniel • Moloney said, AUD/USD is predicted to find support at 0.8980, and a drop through could take it to the next support line of 0.8938. Meanwhile, the pair is predicted to find its first resistance at 0.9055, and a rise through could take it to the next resistance line of 0.9088.

The Aussie moved higher after the Commerce Department said US new home sales dropped by a larger-than-forecast 13.4% in July, the biggest decline in more than 3 years. Analysts had expected US new home sales to decline by 2% last month.

The data came amid ongoing speculation over whether the Fed will start to scale back its USD85 billion-a-month asset purchase program in September.

Wednesday’s minutes of the Fed’s July meeting showed that officials were "broadly comfortable" with plans to reduce asset purchases, but divisions over the timing of possible tapering remain, with almost all committee members agreeing that a change in the purchase program was not yet appropriate.

The minutes also described recent US economic data as “mixed “, indicating that plans to taper could be pushed back if the economy was to weaken.

The Australian dollar was also pressured after the Reserve Bank of Australia said earlier in the week that further rate cuts remain possible in the future.

In the minutes of its latest policy meeting, the RBA said the Aussie's directionwill be important in setting policy and signalled further interest rate cuts remain a possibility. On August 6, the RBA lowered its benchmark interest rate to a record low 2.5%.

In the week ahead, investors will be looking ahead to revised data on US second quarter growth, as well as reports on the housing sector and consumer confidence.

(COZ forex UK)