The Australian dollar is poised to post its first weekly gain in 5 weeks but it’s awfully difficult to be optimistic. Where is the bounce?

Reasons AUD/USD should have bounced by now:

  1. The US dollar has been softer
  2. Shanghai stocks climbed 13% from the bottom
  3. The S&P touched an all-time high
  4. Australia had a decent jobs report
  5. The RBA didn’t cut and wasn’t particularly dovish
  6. The market is massively short
  7. Even gold bounced

Yet here we are with AUD/USD barely 2 cents above the 33-month low.

AUDUSD daily chart July 19

Technically, AUD/USD doesn’t look great either. The highs and lows have both been lower and the sideways move over the last month has relieved oversold conditions.

The Aug 7 RBA decision looms and that will be the best chance for AUD/USD to bounce and the OIS market is pricing in a 63% chance of a cut. If they don’t cut, it’s still not great news for AUD so long as they keep a dovish bias. Expectations for the coming year are only about 38 basis points of easing and the risk of more easing will remain higher than less.