Weekly Technical Outlook – AUDUSD, GBPUSD, US 500 index
RBA Policy Meeting --> AUDUSD
AUDUSD failed once again to rally above its 200-day simple moving average (SMA), and with technical indicators lacking clear bullish signals, the risks appear skewed more to the downside than the upside. That said, investors may remain cautious until the Reserve Bank of Australia (RBA) announces its policy decision on Tuesday, accompanied by updated economic projections that may provide more clarity.
The central bank is expected to deliver a 25-basis-point rate cut to 3.85%, though investors are keen to determine whether this will be a hawkish or a dovish reduction. Futures markets currently see two more equivalent rate cuts by the end of the year. With inflation stabilizing within the RBA’s 2–3% target range in Q4 2024 and a reacceleration in wage growth, there seems to be little urgency for further easing.
On the geopolitical front, Australia has not been a target of Trump’s tariff policies, partly due to its modest trade deficit with the US and its strategic importance as a gateway to Asia. This could give policymakers less cause for concern regarding inflation risks, although the export-oriented nature of the economy still warrants some caution.
If the RBA signals reluctance for back-to-back rate cuts, AUDUSD could break above the 0.6427 resistance to test the 0.6500 psychological level. A move beyond 0.6550 would be an even more significant bullish signal. Conversely, a dovish stance pushing for further easing could send the pair below the 0.6360 support and potentially into the 0.6280-0.6300 region.
UK CPI, flash S&P Global PMI Data --> GBPUSD
GBPUSD opened the week with a strong upward momentum, climbing to an almost two-week high of 1.3370 and breaking above a bearish channel. The rally followed a tentative agreement between the UK and EU on defense, security, fisheries, and youth mobility - allowing British firms to participate in large EU defense contracts ahead of Monday’s summit.
Previously, the UK secured trade agreements with both the US and India after prolonged negotiations, lifting a layer of uncertainty. Still, questions linger over the Bank of England’s next policy move, especially regarding potential rate cuts in the coming months. This week’s UK CPI and flash PMI figures - due Wednesday and Thursday - could shift the spotlight back to monetary policy.
Forecasts suggest a rebound in inflation, with the headline CPI expected to rise to 3.3% in April, while the preliminary business PMI could edge up to 50. A positive surprise in the data may propel GBPUSD toward April’s three-year high of 1.3443. If that level is breached, the pair could stage an impressive rally towards the 1.3600 area.
Fed Speakers --> US 100 Index
In the US, Moody’s unexpected downgrade of the country’s credit rating from Aaa to Aa1 added fresh downside pressure on Wall Street, the US dollar, and Treasuries, with global equity markets also reacting negatively at the start of the week.
Having recovered a significant portion of its February–April decline, and now only 5% below its all-time high, the US 100 index appears technically overbought. This raises concerns about the index's ability to resume its record-setting uptrend in the near term.
Fed officials are scheduled to speak this week and may play a key role in stabilizing sentiment by emphasizing the economy's underlying strength. However, markets will be watching closely to see if the downgrade reignites rate cut expectations - and whether that would be enough to lift equities again.
From a technical perspective, a drop below the 21,000 mark could confirm a bearish doji candlestick pattern, opening the door for a decline toward the 20,500 region and the long-term 100- and 200-day SMAs. Alternatively, a bounce above 21,320 would refocus attention on the 22,000 psychological level and the double-top resistance near 22,230.