AUD/USD Outlook – August 31 – September 4 2009



After a rather quiet week of perfect range trading, the upcoming week is huge. What a week awaits the Australian dollar: GDP, a rate decision and 9 more indicators are released this week. Here’s an outlook for the Aussie events, and an updated technical analysis for AUD/USD.

AUD/USD forex chart with important support and resistance lines marked on it:

AUD/USD Technical Analysis September 2009

Private Capital Expenditure, which was far better than expected, helped the AUD/USD to make gains on Thursday. Also the other three indicators last week were good. This week feature more releases and of higher importance. Let’s dive into them:

  1. HIA New Home Sales: I’m starting with this indicator, since it still doesn’t have a release time, but it’ll probably be at the beginning of the week. As a housing sector figure, it’s important, despite being released in a month’s delay. Last time this index rose by 0.5%. A rise can be expected this time as well.
  2. MI Inflation Gauge: The Melbourne Institute publishes this figure very early in the week – on Monday at 00:30 GMT. This is an early version of CPI. The MI Inflation Gauge showed acceleration in prices in the last months. If prices are indeed picking up, this would push the RBA to raise the interest rate.
  3. Private Sector Credit: Borrowing in Australia has been quite stable in recent months, being around zero. After rising by 0.1% last time, consumer borrowing is expected to grow by 0.2% this time. More borrowing = more spending = inflation pressures.
  4. AIG Manufacturing Index: The Australian Industry Group surveys about 200 manufacturers and publishes this figure every month. Similar to PMI releases, a figure below 50 means contraction. This release is interesting, since contrary to other Australian indicators, it has remained down under for quite some time. Last time it rose to 44.5. Will it go above 50 this time? We’ll know on Monday at 23:30 GMT.
  5. Building Approvals: This major housing figure is very shaky. After dropping by 12.5% two months ago, it leaped by 9.3% last month. This time, it’s expected to rise by 3.3%. Despite its wild behavior, this indicator is an excellent gauge for the whole economy, and tends to have strong impact on AUD/USD. Published on Tuesday at 1:30 GMT.
  6. Current Account: Australia’s deficit is squeezing in recent months, reaching 4.6 billion. This time it’s predicted to expand and rise to 10.3 billion. Unless there’s a big surprise, the impact will be small, since it’s published together with Building Approvals.
  7. Rate Decision: Australia continues to have the highest interest rate in the West, and will most probably continue to hold this title. The Cash Rate is predicted to remain at 3%. RBA Governor Glenn Stevens, stated in parliament that the interest rate should go back to normal. Will he repeat this statement? We’ll know at the RBA Rate Statement. This major event is due on Tuesday at 4:30 GMT.
  8. Commodity Prices: Australia’s exports lean on commodities. This release, on Tuesday at 6:30 GMT, is an annually adjusted number, so it’s expected to remain negative, despite the recent rise in oil prices. Last time it showed a fall of 31.8%. It should slightly rise this time.
  9. GDP: Australia never fell into recession during this crisis – the economy contracted for only one quarter. Growth is expected to continue in the second quarter – a rise of 0.6% is predicted after a 0.4% rise in the first quarter. This all-important release is due on Wednesday at 1:30 GMT. AUD/USD will shake…
  10. AIG Services Index: This is the complementary release to Monday’s AIG Manufacturing Index. According to AIG, the services sector showed expansion intentions two months ago, which was better than the manufacturing sector. Currently they’re both around 44. We should see a rise also here. Published on Wednesday at 23:30 GMT.
  11. Trade Balance: Despite having a commodity-export-oriented economy, the global recession sent Australia’s trade balance into a deficit. After a deficit of 440 million last time, the deficit is predicted to expand to 800 million. Published on Thursday at 1:30 GMT.

As you can see, there are no Australian releases on Friday. The scene totally belongs to the American Non-Farm Payrolls, and the anticipation for their release. Other important American data will also move the pair, but this week’s packed Australian calendar leaves little room for them…

AUD/USD Technical Analysis

The Aussie began the week by rising to 0.84. It tumbled on Wednesday and bottomed out at 0.8238 – right above the support line. Contrary to the previous week, 0.8230 held strong. This confirms that the drop in the previous week to 0.8160 was indeed a false summer break.

When the dollar began falling on Thursday, the Aussie leaped back up, and also here it was blocked by the 0.85 resistance line, before closing at 0.8407.

All in all, AUD/USD had perfect range trading, as predicted in last week’s Aussie outlook.

So, beyond 0.85, 0.88 is the next resistance line. It served as such when the crisis began. If the dollar will fall, AUD/USD will aim for this target.

On the bearish scenario, a real break under 0.8230 will open the road to 0.77, the next serious support line, which served as such in recent months, and immediately after the crisis began.

Bullish on AUD/USD

The Australian economy is doing great. As aforementioned, recession hasn’t reached the land down under. If the positive situation is confirmed in this week’s influx of data, the Aussie should go up. I have a strong bullish sentiment.

Further reading:




About

Yohay Elam – Founder, Writer and Editor

I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me.

Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

3 Comments

  1. Russell Melhem says:

    Hi Guys

    Let us discuss the real AUD from someone who is living down under. I told readers in May that the Aussie was a power house, fundementally a top notch currency and a government that do not believe in printing money to solve debt problems.

    However what you will not hear is the following.

    1.Australia has the highest housing prices relative to disposal income in the whole wide world.

    2. This means Australia is a very interest rate sensitive country. Any rate hikes will see voter and economic backlash, internally. The consumer is struggling and living on credit card debt already.

    3. Aussies love imports more than exports. The GDP

    deficit cannot grow in a democracy that now thinks debt is a dirty word.

    4.Obama eat your heart out, The lap dogs of the Government the four and only major banks, the ones

    that we couldn't short sell due to a ban are tightening there lending and creating daily withdrawal limits. It is very difficult to get a line of credit from a bank. Lending criteria is very tough. Equity withdrawals are meet with many questions.

    5.The government is giving away up to $24,000 AUD for first time home owners and removing stamp duty taxes up to $15,000 AUD.

    6.New homes under $600,000 get 50% stamp duty rebates.

    7. The government is thinking of putting capital gains taxes on owner occupier, family homes. This will put further pressure on property.

    8. There is a shortage of houses because the state governments release land sales, this is like the diamond trade. Manipulated land prices.

    9. Australia has had a 50 year stimulus package, it is called government welfare and it is the best in the world. However welfare payments have remained steady of the last five years and not inline with inflation.

    10.If property is expensive so is the rent, rent has gone up 30% in Sydney this year!!!!. This is inflation that cannot be solved by interest rate hikes.

    11. Overall with the above factors and many that I have not mentioned. The RBA is talking up the dollar to about the 84.60-85.00 mark to buy back their US dollars they sold back in October, to keep the AUD above 60 cents.

    12. A strong AUD will effect Asia's recovery, it will bring short term investors and carry traders that will have a brothel effect on the Australian economy.

    13. My strategy will be to short sell the AUD/USD using good till cancelled CFD's. The AUD will oneday comeback to the the mid 70's price range, as every country knows a low currency means more exports, therefore more jobs and more tax.

    14.A message to the speculators and gamblers. If you treat the FX market as a casino the FX market will soon end your addiction the hard way.

    This information was provided on a general basis only. Please seek your own independent financial advice before trading.

  2. Yohay says:

    Russell, thanks for your long comment.

  3. Russell Melhem says:

    Thanks Yohay, I made a good return last night shorting the AUD. Resources will for the next 3 years go continue to go through the roof and so will resource currencies. What all this means is a world that is beginning to prepare for an all out war.

    No matter what you hear or people say the EU will become only a 10 member union. The Euro will one day, soon become king.(Ask China and Russia). The EU are prepared for hyper-inflation.

    The EU is about the power of the Catholic church, the most powerful and wealthy organisation on the face of the earth. Who rules the undestructible Germans & Germany today?

    Forget politicians, follow the real decision makers that move the world.

    Therefore Buy, hold, sell and re buy:

    Gold,resources, resource currencies and Euro's I rest it at that.

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