AUD/USD Forecast January 26-30 2015

AUD/USD tumbled over 300 points last week,  as the pair closed below the 0.80  line, its lowest level since July 2009. This week’s highlights include NAB Business Confidence, CPI and PPI. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

With the currency markets in disarray following the SNB shocker and the ECB’s QE announcement, minor currencies like the Aussie showed sharp losses last week. Solid consumer spending and confidence numbers were not enough to blunt the US dollar tidal wave. In the US, key data was a disappointment. Unemployment Claims  was higher than forecast, while Existing Home Sales missed expectations.  A beat in  Chinese GDP  was only enough to hold the Aussie up for a short while.

AUD/USD graph with support and resistance lines on it. Click to enlarge:

1. NAB Business Confidence: Tuesday, 00:30. Confidence in the business sector is waning, as the indicator has dropped for four consecutive months. The indicator dropped to just 1 point in the November reading. If Business Confidence slips below the zero line in December, we could see the Australian dollar lose ground.
2. MI Leading Index: Tuesday, 23:30. The index is a minor event as most of the data has already been released.   The indicator has been very steady, posting a decline of -0.1% in four of the past five releases.
3. CPI: Wednesday, 00:30. CPI is one of the most important indicators, and traders should treat it as a market-mover. The index has been weakening in recent releases  and came in at 0.5% in Q3. The downtrend is expected to continue, with  an estimate for Q4  of 0.3%.
4. Trimmed Mean CPI: Wednesday, 00:30. This index excludes the most volatile items which make up CPI. In Q3, the index dipped to 0.4%, shy of the reading of 0.6%. The  forecast for Q4 reading is 0.5%.
5. CB Leading Index: Wednesday, 23:00. This minor indicator continues to posts declines, pointing to weakness in the economy. The November reading came in at -0.2%.
6. Import Prices: Thursday, 00:30. Import Prices is released   each quarter, and is linked to inflation readings. The indicator posted a decline of -0.8% in Q3, its third decline in four quarters. The markets are expecting a strong turnaround in Q4, with an estimate of 1.5%.
7. PPI: Friday, 00:30.  PPI is the primary measure of inflation in the manufacturing sector. The Q3 reading came in at 0.2%, matching the forecast. Little change is expected in the Q4 reading, with an estimate of 0.3%.

* All times are GMT.

AUD/USD Technical Analysis

AUD/USD started the week at 0.8225 and quickly touched a  high of 0.8244. It  was all downhill from there as the pair lost  throughout the week, touching a low of 0.7880.  AUD/USD broke below support at 0.7904 (discussed last week) and closed the week at 0.7901.

Live chart of AUD/USD:

Technical lines from top to bottom:

With the Aussie sustaining sharp losses, we start at lower levels:

0.8313 has held firm as resistance since mid-December.

0.8150 has switched to resistance following the pair’s sharp losses.

0.7978 was an important cap in January 2007.  It has reverted to  a resistance role as UD/USD easily broke through this line.

0.7904 had provided support since July 2009. The pair is trading just below this line, which could see action early in the week.

0.7799 is an immediate support level. It has remained intact since September 2008.

0.7601 was last tested in  July 2009.

The final support line, for now, is 0.7403.

I am bearish on AUD/USD.

The US dollar continues to show broad strength and if  Australian inflation numbers  are weak, the Aussie slide could continue. In the US, the Fed will release its statement, and if the Fed provides any clues  about the timing of a rate hike,  the greenback  could respond with gains.

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