AUD/USD Outlook December 5-9
The Australian dollar had a banner week against the US dollar, climbing nearly 300 points in one day, and closing up almost 400 points higher for the week. The outstanding gains resulted from the move by the world’s largest central banks to boost liquidity in response to the eurozone crisis. The upcoming week is quite busy in terms of events. Here is an outlook for the Australian events, and an updated technical analysis for AUD/USD.
The fragile Australian economy continues to struggle with the global slowdown and lower demand from China. In addition, the euro zone debt crisis is threatening to spill over into Australia by pushing up bank funding costs and causing European banks to reduce their exposure to Asia.
Updates: ANZ Job Advertisements remained unchanged in November, better than drops in previous months. The Aussie ignored this, but moved up on the agreement announced by Angela Merkel and Nicolas Sarkozy. The move is limited though, and the 1.0314 line was not challenged. The RBA cut interest rates to 4.25%. Concerns about Australia, China and the whole world are strong. The Aussie took a dive but managed to recover. The Australian dollar still moves by the action in Europe. The recent S&P warning weighs on it. The Australian economy grew by 1% in Q3, as expected. This helped the Aussie, but it is weighed down by the European crisis. The next big release is employment figures from Australia. See how to trade the employment change release with AUD/USD. Employment figures were a disappointment, with a loss of over 6K jobs and a rise of the unemployment rate to 5.3%. The Aussie got another blow from the lack of help from the ECB to troubled European countries. The Australian dollar enjoyed the drop in Chinese CPI, but was hurt from the weak results of the EU summit.
AUD/USD graph with support and resistance lines on it. Click to enlarge: 
- AIG Services Index: Sunday, 22:30. This important sector has spent most of 2011 below 50, indicating industrial contraction. Last month’s reading was 48.8.
- MI Inflation Gauge: Sunday, 23:30. Inflation has been very low over the past few months, with the monthly inflation index hovering around 0.1%.
- ANZ Job Advertisements: Monday, 00:30. This employment indicator was up in October, but still remained in negative territory at -0.7%.
- Company Operating Profits: Monday, 00:30. After three consecutive negative readings, the quarterly indicator roared back with stellar figures of 6.7%. The forecast for this month is a more modest increase of 3.2%.
- Current Account: Tuesday, 00:30. This is an important indicator, as it is closely connected to currency demand. Market forecasts are generally very close to the actual figures. The forecast for the December reading is -5.5B, slightly better than the previous reading of -7.4B.
- Cash Rate: Tuesday, 03:30. This indicator of short term interests rates is always of importance to currency traders and analysts. The forecast for the December reading is 4.25%, down from November’s release at 4.5%.
- RBA Rate Statement: Tuesday, 03:30. The RBA will discuss its monetary policy and its views on economic conditions, as well as possible future interest rate moves.
- AIG Construction Index: Tuesday, 10:30. This index, which measures the health of the construction sector, hit a 32-month low of 30.0 in October. It rebounded slightly to 34.7 in November.
- GDP: Wednesday, 00:30. This crucial indicator is released quarterly. The forecast for this quarter is 1.2%, identical to the figure for the third quarter.
- Employment Change: Thursday, 00:30. This indicator has been extremely volatile in 2011. Not surprisingly, this has resulted in market predictions way off the mark. The previous reading came in at 10.1K, and the market forecast is 10.6K.
- Unemployment Rate: Thursday, 00:30. Unemployment has hovered at around 5% during 2011. The forecast for the December reading is 5.2%, unchanged from the previous reading.
- Glen Steven Speaks: Thursday, 07:20. The head of the central bank will be speaking, and his listeners will be looking for hints of the bank’s future monetary policy.
- Chinese CPI: Friday, 01:30. Inflation spiked at 6.5% in July, but has dropped somewhat, with a forecast of 4.6% for this month.
- Chinese PPI: Friday, 01:30. Like its CPI counterpart, the PPI (Producer Price Index) has been on a downward trend, and the forecast for the December reading stands at 3.3%, well below the July figure of 7.5%.
- Chinese Fixed Asset Investment: Tentative. This monthly indicator measure capital investment, and is always very close to a figure of 25%. Thee forecast for this month is 24.8%.
- Chinese Industrial Production: Tentative. As China is Australia’s main trading partner, industrial production always has an effect on the Ausralian export sector, and hence on the Aussie. The market forecast for this month, is 12.8%, down slightly from the previous reading of 13.2%.
- Chinese Retail Sales: Tentative. This indicator has given readings of close to 17% for most of 2011, and this month’s forecast stands at 16.9%.
*All times are GMT
AUD/USD Technical Analysis
Aussie/Dollar began the week at 0.9829. It climbed as high as 1.0330, which again proved to be a line of strong resistance (discussed last week). The pair ended the week at 1.0215.
Technical levels from top to bottom:
We begin at the resistance line of 1.0717. Next is the round number of 1.05, which served as strong resistance in August and September. 1.0460 was a support level in September, and is now a line of resistance. Below, 1.04 was a swing low in June and also the peak of a failed recovery attempt in September. It was also a cap in October, and its position is stronger once again. The line of 1.0335 was reached last week and may be tested again this week. Next, 1.0211 is a minor support line. 1.1044 acted as a line of support earlier in the year, and may play this role again if the Aussie continues on its upswing.
The very round number of parity strengthened in September after capping a recovery attempt. It also proved its importance in October. Below parity, 0.9953 is a line of weak resistance.
0.9850, provided support when the Aussie was falling in October and is minor now. Below, 0.9803 provides further resistance. The round number of 0.97 provided some support for the pair in September, before falling even lower.
0.9622 was a swing low and serves as the final line of support for now.
I am bearish on AUD/USD
The outstanding rally by the Aussie this past week was likely a one-time performance. The continuing weakness in China, Australia’s main trade partner, and the ongoing debt crisis in Europe are all weighing on the Australian dollar.
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 the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the New Zealand dollar (kiwi), read the NZD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.
