AUD/USD Forecast May 20-24

The Australian dollar  continues to nose dive, shedding another 260 points this week. AUD/USD dropped close to the 97 line, and closed the week at  0.9725. This week’s highlight is the RBA’s Monetary Policy Meeting Minutes.  Here is an outlook of the events and an updated technical analysis for AUD/USD.

The Aussie is getting hammered, and is yet to find its footing against the surging US dollar. The Australian currency was hurt by the budget release, which predicts a record deficit and noted that the  high value of the Australian dollar was hurting  economic growth. As well, New Motor Vehicle Sales  declined,  as  worried consumers scale back on big-ticket purchases.

Updates: AUD/USD started the week with a comeback: the pair opened around 0.9740 and rose towards 0.98. So far, it is trading around 0.9760. Drops in prices of silver and gold weigh on the Aussie. Here is an Elliott Wave Analysis of gold:  GOLD Bearish Reversal in Progress, Could Hit 1300.    AUD/USD enjoyed the  not-enough hawkish statements from Evans, an FOMC member from the US that didn’t hint about QE-tapering. This sent AUD/USD above the 0.98 line, in a nice correction. CB Leading Index dropped lower, posting a weak 0.1% gain. The RBA released its Monetary Policy Meeting Minutes. At the previous meeting, the RBA surprised the markets, as it reduced rates from 3.0% to 2.75%. The RBA noted that low inflation and a very strong Australian dollar were weighing on the economy, and were important factors in the decision to reduce rates. The central bank also forecast that the export sector would get back on its feet, as the economies in the US, China and Japan were improving and this would increase demand for Australian goods. Westpac Consumer Sentiment will be released on Thursday. AUD/USD has edged lower, as the pair as trading at 0.9780. The Australian dollar enjoyed the weakness of the USD following some speeches from FOMC officials and rose above 0.98. However, a report about peak resource investment sent the Aussie down in the 0.9750-0.9840 range it established. Also the Westpac consumer sentiment release disappointed with a drop of 7%. The focus now shifts to the US, to Ben Bernanke’s testimony. Bernanke provides a huge drama: at first, he stated that it would be premature to withdraw stimulus as this would hurt the recovery, and the USD dropped. However, when asked, Bernanke mentioned that the Fed could taper, and AUD/USD crashed below 0.97. Even though Bernanke was very cautious, the dollar bulls are in control. There is no mercy for the A$: after failing to recover above 0.97, weak Chinese manufacturing PMI sends the Aussie even lower. The index fell under the 50-point level, indicating contraction, for the first time since October 2012. The fresh low is 0.9625. The June 2012 low of 0.9580 is now in sight. MI Inflation Expectations remains steady, posting a gain of 2.3%. The previous release came in at 2.2%.   AUD/USD continues to slide, and is testing the 96 line on the downside. After reaching the lows,  AUD/USD makes kangaroo leap off long term support, hammer pattern or sell opportunity? Market moves are quite extreme these days. The Australian dollar continues providing a drama, falling from 0.97 after reaching the highs, and despite some dollar correction. The Australian dollar

More technical analysis:  AUD/USD Declines to Major Support. AUD/USD is unable to reconquer the 0.97 line, as better than expected durable goods orders in the US support the US dollar.

AUD/USD suffers a late drop on Friday and clsoes at 0.9644, not too far from the critical 0.9580 line. The updated AUD/USD will be published on Sunday.

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

1. CB Leading Index: Monday, 0:00. This important index is comprised of 7 economic indicators. The index has posted modest gains in its past two readings, with a gain of 0.3%. The markets are hoping for another reading in positive territory in the May release.
2. Monetary Policy  Meeting Minutes:  Monday, 1:30. This is the highlight of the week, and should be treated by traders as a market-mover. The minutes cover the RBA’s previous monetary policy meeting, which should make for interest reading, as the RBA again caught the markets by surprise when it lowered interest rates to 2.75% earlier this month.
3. Westpac  Consumer Sentiment:  Wednesday, 0:30. This consumer confidence index has exhibited plenty of volatility, making accurate forecasts a tricky task. The index looked awful in April, dropping 5.1%. This was the indicator’s sharpest dive since December 2011. Will we see a rebound in the upcoming release?
4. MI Inflation Expectations: Thursday, 1:00. This indicator  is  followed by analysts to track actual inflation figures.  Inflation Expectations have stayed steady in recent readings, and the April release saw a gain of 2.2%. No major change is expected in the upcoming release.
5. Chinese Flash Manufacturing PMI:  Thursday, 1:45. Chinese Flash Manufacturing PMI has stayed above the 50-point line, since October 2012, indicating ongoing expansion in the Chinese manufacturing sector. The PMI dropped to 50.5 points in April, and the same reading is expected in the May release. Chinese key events are market-movers, since China is Australia’s number one trading partner.

AUD/USD Technical Analysis

AUD/USD opened at 0.9984, and  climbed to a high of 1.0011.  It was all downhill after that, as the pair dropped sharply, touching low of 0.9711.  The support line of 0.9907 (discussed last week) remained intact. The pair closed the week at 0.9725.

Technical lines from top to bottom:      

The pair faces resistance at 1.0323, which  was last tested in early May. Below, there is resistance at 1.0263. This is followed by 1.0183, which  had  provided support since March,  but was breached as the pair plunged lower.  The next line of resistance is at 1.0093. This is followed by the parity line, which AUD/USD crashed through early last week. Next is 0.9913. This line has strengthened as the pair trades at lower levels. This is followed by 0.9797, which had served as support  since June 2012, but fell as the pair pushed lower.

AUD/USD is receiving  support at  0.9627, which has remained intact since early June 2012. Next, there is support at 0.9541. This line was last tested in September 2011. This is followed by 0.9405, which is protecting the 94 level. This line has remained intact since October 2011. The final support line for now is 0.9275, which has not been tested since September 2010.

I  continue to be  bearish on AUD/USD.

One does not have to look far for factors which have contributed to the woes of the Australian dollars. The RBA rate cut, weak consumer spending, and a bleak budget are all weighing on the Aussie, which has shed over six cents in the month of May. The downward trend could well continue if investors opt to stay away from the risky Australian dollar in favor of the safe-haven greenback.

For the bigger picture, the weekly chart provides guidance. Following the crash,  here is a guide to the next big levels.

More about the collapse of the Australian dollar:

• AUD/USD Set to Fall to 0.60? – FX Concept’s John Taylor thinks so.
• Aussie presents a total collapse: a look at 5 Aussie pairs  – The Aussie also collapsed against other currencies, and lost some big levels.
• Forex Analysis: AUD/USD Continues Dramatic Plunge to Establish New Lows  – Technical analysis by James Chen.
• AUDUSD Bearish; Wait On Pull-back For New Shorts  – Elliott Wave Analysis

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

Further reading:

• For a broad view of all the week’s major events worldwide, read the USD outlook.
• For EUR/USD, check out the Euro to Dollar forecast.
• For the Japanese yen, read the USD/JPY forecast.
• For GBP/USD (cable), look into the British Pound forecast.
• For USD/CAD (loonie), check out the Canadian dollar forecast.