AUD/USD Forecast Nov. 4-8

The  Australian dollar had a rough week, as  AUD/USD  lost about  140 points. The pair closed at 0.9436.  The upcoming week is busy, with 13 releases  on the schedule.  Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

Australian Building Approvals and PPI looked sharp last week, but the solid releases were of little help to the Australian   dollar. Concern over weak US employment numbers  has led to increase nervousness  about the health of the  US economy, and this had  led to investors seeking the safety of  the US dollar at the expense of risky assets  such as the Australian dollar.

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

1. MI Inflation Gauge: Sunday, 23:30. This indicator is published each month, and helps analysts track the official CPI release, which is released each quarter. The indicator has posted modest gains in the past two months, and came in at 0.2% last month. The markets will be hoping for a stronger gain in the October release.
2. Retail Sales: Monday, 00:30. Retail Sales is the first key event of the week and is the most important consumer spending release. The indicator rose to 0.4% in September, a six-month high. The markets are forecasting a slight improvement in the upcoming reading, with an estimate of a 0.5% gain.
3. ANZ Job Advertisements: Monday, 00:30. This important employment indicator has been struggling, and last month’s weak gain of 0.2% broke a nasty string of six consecutive declines. The markets are hoping for another gain in the upcoming release.
4. HPI: Monday, 00:30. The House Price Index, released each quarter,  tends to fluctuate, resulting in estimates that are often well off the mark. The index jumped 2.4% in Q2, easily beating the estimate of 1.3%. The markets are e expecting more of the same, with an estimate of 2.3%.
5. AIG Services Index: Monday, 22:30. The Services Index continues to post readings below 50, pointing to ongoing contraction. However, the indicator jumped in September to 47.1 points, up from 39.0 points the month before. Will the upward trend continue in October?
6. Cash Rate: Tuesday, 3:30. The benchmark interest rate has been set at 2.50% since July, and although the RBA is not pleased with the high value of the Australian dollar, the Bank is expected to leave rates at their current levels. The RBA will announce this month’s rate in a Rate Statement.
7. Trade Balance: Wednesday, 00:30. After a string of monthly surpluses, Australia has not posted two consecutive deficits. The September release came in at -0.82 billion dollars, a higher deficit than the estimate of -0.45  billion. A smaller deficit is expected in October, with an estimate of -0.51 billion.
8. AIG Construction Index: Wednesday, 22:30. The Consntruction Index has been steadily improving, but remains below the 50 level. The September reading came in at 47.6 points, and the markets are hoping that the upward trend continues.
9. Employment Change: Thursday, 00:30. This key indicator can have a major impact on the movement of AUD/USD. The indicator bounced back last month with a reading of 9.1 thousand, but this was well short of the estimate of 15.2 thousand. The markets are expecting a slight improvement for the September release, with an estimate of 10.3 thousand. The Unemployment Rate is expected to edge up to  5.7%.
10. RBA Monetary Policy Statement: Friday, 00:30. Analysts will be combing through the statement for the bank’s view on economic conditions and the reasons for its interest rate decision early in the week. The release will take on added significance if the RBA unexpectedly alters the benchmark rate.
11. Chinese Trade Balance: Friday, Tentative. This indicator tends to fluctuate, and recent estimates have not been accurate. The previous release dropped sharply, from 28.5 billion dollars to 15.2 billion. The estimate stood at 25.2 billion. The markets are expecting a sharp turnaround for October, with an estimate of 23.5 billion.
12. Chinese CPI: Saturday, 1:30. Chinese CPI jumped to 3.1% in September, its highest level since April 2012. The estimate for the upcoming reading calls for another sharp gain, at 3.3%.
13. Chinese Industrial Production: Saturday, 5:30. This indicator has topped the 10% level for two straight reading, and the estimate for the October release stands at 1o.1%. As China is Australia’s number one trading partner, a strong reading is bullish for the Australian dollar.

* All times are GMT

AUD/USD Technical Analysis

AUD/USD started the week at 0.9598 and rose to a high of 0.9622. The pair then reversed course, dropping below  sharply and touching a low of 0.9422. The pair closed the week at 0.9436, as support at 0.9428 (discussed last week) remained intact.

Live chart of AUD/USD: [do action=”tradingviews” pair=”AUDUSD” interval=”60″/]

Technical lines from top to bottom:

With AUD/USD recording sharp losses last week, we begin at lower levels:

Parity remains a key resistance line. This psychologically significant level has remained intact since May.

Next, there is resistance at 0.9913. This is followed by resistance at 0.9828.

The line of 0.9751 provided key resistance in early June and with AUD/USD losing ground, it remains a strong resistance line.

0.9670 was a cap for the pair in late May. It was briefly breached in late October but continues in a resistance role.

0.9556 has reverted to a resistance role as the Australian dollar dropped sharply.

0.9428 was busy in the first half of October and was breached last week, but ended the week as a weak support line. It could face action early this week.

0.9283 saw a lot of action in the months of June and July, alternating between resistance and support roles. It has provided steady support since mid-September.

0.9180 is the next support level. This is followed by the round number of 0.9000. This psychologically important level was breached in early September, when the Australian dollar started a strong rally which saw it break past the 0.95 line.

The final line for now is 0.8893. This has been a strong support line since August 2010, when the Australian dollar put together a strong rally which saw it climb above the 1.10 line.

I am bearish on AUD/USD.

The impressive Aussie rally, which began in September when the currency was below the 90 level, may have run out of steam. The RBA continues state that the Australian dollar is overvalued, and this week’s key releases, such as Retail Sales and Employment Change, will have to look sharp or the pair’s downward trend continue.

• 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 the Australian dollar (Aussie), check out the AUD to USD forecast.
• USD/CAD (loonie), check out the Canadian dollar.