Category: AUD/USD Forecast

AUD/USD Forecast Dec. 2-6



AUD/USD continues to lose ground, but the losses were modest this past week. The pair closed the week just above the 0.91 line. There are a host of key events in the upcoming week, including Retail Sales and the Cash Rate. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

There was good news from both countries last week. US Unemployment Claims looked strong last week, while Australian Private Capital Expenditure posted a sharp gain.

Updates:

AUD/USD graph with support and resistance lines on it. Click to enlarge:   AUD USD Forecast Dec. 2-6

  1. AIG Manufacturing Index: Sunday, 22:30.The index has shown improvement, posting readings above the 50-point level for the past two readings. This indicates expansion in the manufacturing sector. The markets are hoping for another release above the 50 level.
  2. MI Inflation Gauge: Sunday, 23:30. This monthly indicator helps analysts track CPI, which is only released on a quarterly basis. The indicator has posted weak gains of late, with a 0.1% reading last month.
  3. Building Approvals: Monday, 00:30. This is the first key event of the week. The indicator tends to fluctuate sharply, making accurate predictions a tricky task. After posting a decline in September, the indicator roared back with a 14.2% gain, crushing the estimate of 2.9%. The markets are expecting a downturn in the upcoming reading, with an estimate of -4.3% for the November release.
  4. Company Operating Profits: Monday, 00:30. This indicator is posted every quarter, magnifying the impact of each releases. Company Operating Profits has looked weak, posting just gain in the past seven quarters. The reading for Q2 was a disappointing decline of 0.8%, way off the estimate of a 1.1% gain. The markets are hoping for better numbers for Q3.
  5. Commodity Prices: Monday, 5:30. Commodity Prices are showing improvement, with the monthly declines showing a marked decrease. The October reading dropped by just 1.0%. Will we see a gain in the November release?
  6. Retail Sales: Tuesday, 00:30. Retail Sales is the most important gauge of consumer spending. The indicator has been rising and posted a gain of 0.8% last month, surpassing the estimate of 0.5%. The markets are expecting a downturn this time around, with an estimate of 0.4%.
  7. Current Account: Tuesday, 00:30. Current Account is closely linked to currency demand, since foreigners must purchase Australian dollars to conduct domestic transactions. The monthly deficit has been rising, and hit -9.4 billion dollars last month, well above the estimate of -8.3 billion. The markets are expecting the deficit to balloon to -11.1 billion in November.
  8. Cash Rate: Tuesday, 3:30. The RBA has not lowered the benchmark interest rate since July, which is currently pegged at 2.50%. However, the Bank has repeatedly stated that it feels the Australian dollar is overvalued, and conceivably could lower rates in order to push down the currency. Although no change in the rate level is expected, the Bank has surprised the markets in the past with a rate cut. The November rate will be announced in a Rate Statement.
  9. AIG Services Index: Tuesday, 22:30. The Services Index has been moving higher, and the index hit 47.9 points in October, a seven-month high. The markets are hoping that the upward trend continues in the upcoming release.
  10. GDP: Wednesday, 00:30. GDP is one of the most important economic releases and should be treated as a market-mover. The indicator has posted three straight gains of 0.6%. The November estimate stands at 0.7% and if GDP can meet or beat the estimate, the Australian dollar could get a boost.
  11. Trade Balance: Thursday, 00:30. Trade Balance is closely linked to currency demand, so this key event can have a major impact on AUD/USD. Australia has posted three consecutive trade deficits, although the most recent reading of -0.28 billion dollars was better than the estimate of -0.51 billion.  The estimate for the upcoming release stands at -0.33 billion.
  12. AIG Construction Index: Thursday, 22:30. The index has shown remarkable improvement compared to the early part of 2013, and jumped above the 50-point level in October, indicating expansion in the construction sector. The markets are hoping for another reading above 50 in the upcoming release.

*All times are GMT

AUD/USD Technical Analysis

AUD/USD started the week at 0.9165 and rose to a high of 0.9204 early in the week, breaking above resistance at 0.9180 (discussed last week). However, the pair then reversed directions and dropped below the 0.91 line, touching a low of 0.9056. The pair closed the week at 0.9107.

Live chart of AUD/USD:


Technical lines from top to bottom:

We start with resistance at 0.9556. 0.9428 was busy in the first half of October and is currently providing strong resistance.

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 was breached by the pair as it moved higher early in the week. It remains in place as a resistance line as we start the new trading week.

Next is the round number of 0.9000, which continues in a support role.  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.

0.8893 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.

0.8728 is the final support level for now. This line was last breached in July 2010, when the Australian dollar began an extended rally that saw it climb close to the 1.10 line.

I am bearish on AUD/USD.

The RBA is taking every opportunity to talk down the Australian dollar, and this could continue to weigh on the currency, even if the Bank avoids a rate cut. If US employment numbers are solid this week, QE taper speculation will grow, which could help the dollar, as a QE scale down is a dollar-positive event.

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