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AUD/USD Forecast February 25 – March 1

For the second straight week, AUD/USD ended up almost unchanged. The pair closed at 1.0320. There are nine events in the upcoming week, including some key Chinese releases.  Here is an outlook of the events and an updated technical analysis for AUD/USD.

Australian data was largely uneventful last week, with the exception of New Motor Vehicle Sales, which declined by 2.2%. There were a number of key US releases that disappointed the markets, but the Aussie managed to hold its ground against the US dollar with an upward push late in the week.

Updates: Chinese Flash Manufacturing PMI was a big disappointment, dropping to 50.4 points. The estimate stood at 52.2 RBA Assistant Governor Guy Debelle spoke at the University of Adelaide. Debelle reiterated the RBA’s view that there is room for further interest rate cuts, and the central bank will take action as needed. Debelle pointed a finger at the high value of the Australian dollar, which has been weighing on the Australian economy. Construction Work Done will be released on Wednesday. AUD/USD remains under pressure, as the pair was trading at 1.0248. Construction Work Done declined 0.1%, way off the estimate of a 1.5%. gain. HIA New Home Sales climbed 4.2%, down sharply from the the previous release of 6.2%. Private Capital Expenditure had its worst showing since August 2010, dropping 1.2%. The markets had expected a 1.1% gain. Private Sector Credit rose 0.2%, missing the estimate of 0.3%. AIG Manufacturing Index will be released later on Thursday, and the markets are also eyeing the Chinese Manufacturing PMI, scheduled for release on Friday. AUD/USD is steady, as the pair was trading at 1.0276.

 

AUD/USD graph with support and resistance lines on it. Click to enlarge:     AUD USD Forecast Feb 25-Mar 1

 

  1. Chinese Flash Manufacturing PMI: Monday, 1:45. This PMI has been above the 50 level since November, and has been on a slow but steady upward trend. Readings above 50 point to expansion. The markets are anticipating further improvement, with an estimate of 52.2 for the upcoming release. Traders should treat key Chinese indicators, such as this one, as a market-mover, given that China is Australia’s number one trading partner.
  2. RBA Assistant Governor Guy Debelle Speaks: Monday, 21:15. Debelle will be speaking at the University of Adelaide. Analysts will be listening closely for any hints as to the RBA’s future monetary policy.
  3. Construction Work Done: Wednesday, 00:30. Construction indicators tend to be volatile, making accurate market estimates a tricky task. The indicator had a respectable showing in January, climbing 1.5%. The markets are expecting another gain this time around, with a forecast of 1.7%.
  4. HIA New Home Sales: Thursday, Tentative: Home Sales is a leading economic indicator, as a new home is likely to be a consumer’s largest purchase. The indicator has been on an upward trend, and jumped 6.2% in the January reading. The markets will be hoping for another strong reading in the upcoming release.
  5. Private Capital  Expenditure: Thursday, 00:30. This key indicator measures business investment, an important component of the economy. The indicator has been on a worrisome downward spiral, and the markets are bracing for a  smaller gain this time around, with an estimate of 1.1%.
  6. Private Sector Credit: Thursday, 00:30. This indicator measures the amount of new credit issued to businesses and consumers. It is an important measure of consumer and business sentiment, which is critical for economic growth. The indicator has been posting very gains in recent months, and the estimate for the upcoming release stands at 0.3%.
  7. AIG Manufacturing Index: Thursday, 22:30. The index has not cracked the 50 point level in a year, indicating sustained contraction in the Australian manufacturing sector. The index fell sharply last month, posting a weak reading of 40.2 points. Will the index rebound with a stronger reading this time around?
  8. Chinese  Manufacturing PMI: Friday, 1:00. Another key Chinese release, this PMI has posted recent readings just above the 50 point level, indicating some  slight  expansion in the Chinese  Manufacturing sector.  No change is expected in the upcoming release.
  9. Commodity Prices: Friday, 5:30. Commodity Prices have been in a steep downward spiral, underscoring weak global demand for Australian exports. However, the declines have been getting smaller in recent releases, and last month’s decline of 6.4% was the best reading since May 2012. The markets will hope that the slow by steady push towards positive territory continues.

AUD/USD opened at 1.0297 and touched a high of 1.0368, as 1.0371 (discussed last week) held firm. The pair then lost ground, falling to a low of 1.0221. The pair then rebounded, pushing above the 1.03 line, to close the week at 1.0320.

We begin with resistance at  1.0806. This line has remained intact since  last February.  Next, is 1.0739. The is followed by 1.0605. The pair has not tested this line since September. Below, there is resistance at 1.0508. This line was breached in January, when the Aussie  commenced a downward trend from which it is yet to recover. Next, 1.0418 continues to provide resistance. We next encounter resistance at 1.0371. This line held firm as the  Aussie moved higher early in the week. Next, 1.0326 continues to be  provide weak resistance  and could see activity if the Australian dollar pushes higher.

AUD/USD  continues to receive  support at 1.0230. This is followed by 1.0174, which was last tested in early October. Next is 1.0080, which is protecting the parity level. The parity line, last tested in June, is psychologically significant and provides the next line of support. Next is 0.9917. This is followed by 0.9876, which has held firm since June of 2012.  The final support line for now is  at 0.9785.

I am bearish on AUD/USD.

AUD/USD managed to stay above the 1.03 line at week’s end, but the pair  remains under pressure, and  briefly dropped into deep 1.02 territory before bouncing back  towards the end of the week.  The RBA  has left room  for further interest rate cuts, which is bearish for the Australian dollar. As well, rhe markets continue to remain concerned with the health of the Australian economy, and the bumpy US recovery is another reason why investors might shy away from shy riskier assets, such as the volatile Aussie.

The Aussie sometimes moves in tandem with gold. You can trade binary options on gold using this technical analysis.

Further reading:

Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.