AUD/USD Weekly Forecast: Powell’s comments weaken dollar

• US business activity fell in August as the manufacturing sector contracted.

• Powell confirmed that the Fed is likely to cut rates in September.

• Next week, investors will focus on core US durable goods orders and Gross Domestic Product.

AUD/USD weekly forecast is bullish. The Australian dollar strengthened against the greenback after Powell’s confirmation of a September interest rate cut.

AUD/USD Ups and Downs

The Aussie had an upbeat week, while the dollar tumbled amid rising expectations of a Fed rate cut. Wednesday’s minutes from the Fed revealed that some policymakers were confident enough to start cutting interest rates at the last meeting. However, the majority decided to hold off and wait for September. Moreover, data during the week showed further weakness in the US economy. Business activity fell in August as the manufacturing sector contracted. This slowdown was evidence that high interest rates were hurting demand.

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The dollar fell on Friday after Powell confirmed the Fed would likely cut rates in September. According to the Fed chairman, upside risks to inflation have decreased, while downside risks to employment have increased.

Next week’s key events for AUD/USD

Next week, investors will focus on core US durable goods orders and Gross Domestic Product. Basic durable goods orders will show the status of the order. The previous report showed orders falling 6.6%. However, economists are forecasting a 4.0% rise in orders this month.

Meanwhile, the GDP report will significantly shape the Fed’s rate cut prospects as it will show how the economy is doing. 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 lead the Fed to consider more significant interest rate cuts, further weighing on the US dollar.

AUD/USD Weekly Technical Forecast: Bulls approach 0.6700 resistance

Technically, the AUD/USD price made a bullish candle after breaking and retesting the key 0.6550 level. This is a sign that bulls are in the lead. Moreover, the price is well above the 22-SMA, the RSI almost overbought.

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However, the bulls are facing the solid resistance level of 0.6700. A break above will strengthen the uptrend. Moreover, it will allow the price to return to the critical psychological level of 0.6800. On the other hand, if the level holds firm, the price could retest the 22-SMA before continuing the uptrend or breaking lower.

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