AUD/USD Outlook July 30 – August 3

The Australian dollar gained over one cent  last week, as  AUD/USD closed at 1.0477. The upcoming week has ten releases, including Building Approvals, Retail Sales and Trade Balance.  Here is an outlook for the Australian events, and an updated technical analysis for AUD/USD.

The aussie  took full advantage of some weak US numbers, including housing data and lower GDP to make gains against the US dollar. As well, there is talk of the Federal Reserve taking monetary action to help the US economy, which would hurt the US dollar.

Updates: HIA New Home Sales had a strong showing, jumping 2.8%. The  aussie continues to move upwards, testing the 1.05 line.  AUD/USD was trading at 1.0497, its highest level since late  March.  Building Approvals declined by 2.5%, but this was a much better reading than the estimate, which stood at a 14.6% drop. Private Sector Credit gained 0.3%, a notch below the forecast of 0.4%. The aussie continues to shine, as it pushed above the 1.05 line. AUD/USD was trading at 1.0523. AIG Manufacturing Index plunged to its lowest level in three years, posting a very weak  40.3 points.   HPI gained 0.5%, surprising the markets which had forecast a 0.5% decline. It was the first increase  since January. Chinese Manufacturing PMI stayed in positive territory, but barely. The key index posted a reading of 50.1 points, slightly below the estimate of 50.4 points. AUD/USD  remained steady, trading at 1.0523. Retail Sales, a key indicator,  recorded a gain of 1%, beating the estimate of 0.6%. Trade Balance surprised the markets by posting a small surplus of 0.01B, as the markets had expected a deficit of 0.36B. It was  the first surplus recorded since February. The aussie fell below the 1.05 line, but then recovered. AUD/USD was  trading at 1.0513.  

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

1. HIA New Home Sales: Sunday, Tentative. This housing indicator is quite volatile, with the result that market estimates often miss the mark. The indicator rose just 0.7% last month, and the markets will be hoping for an improvement in the July reading.
2. Building Approvals: Monday, 21:30. Building Approvals also tends to show a lot of volatility. The indicator sparkled in June, jumping 27.3%. However, the markets are predicting a sharp slump this month, with an estimate of -15%.
3. Private Sector Credit: Monday, 21:30. This indicator has been very steady in recent months, with a 0.5% gain in July. Little change is expected in the July reading.
4. AIG Manufacturing Index: Tuesday, 19:30. The index has been below the 50 point  line since February, indicating sustained  contraction in the manufacturing sector. Will the index show some improvement this month?
5. Chinese Manufacturing PMI: Tuesday, 21:00.  Traders should pay attention to this PMI, as China is Australia’s number one trading partner. The index has been above the 50 point level throughout 2012, and the markets will be hoping for continued expansion in  the Chinese  manufacturing sector.  
6. HPI: Tuesday, 21:30. This quarterly  housing inflation  index has been contracting since Q3 of 2010, indicating sustained weakness in the housing  sector. Will the index reverse the trend and move into positive territory?
7. Commodity Prices: Wednesday, 2:30. Commodity Prices have   been falling for an extended period, indicating weak global demand for Australian exports. Will the  August reading reverse the negative trend?
8. Retail Sales: Wednesday, 21:30. This key indicator rose a modest 0.5% in the previous reading. The markets are expecting little change in the August reading.
9. Trade Balance: Wednesday, 21:30. Australia has been recording monthly trade deficits since February. The markets are predicting a wider trade deficit in August.
10. AIG Services Index: Thursday, 19:30. This index has been improving in recent months, although it  is still below the 50 line, indicating continuing contraction in the services sector. Will the index push  across the 50 line  this month?  

* All times are GMT

AUD/USD Technical Analysis

AUD/USD opened at 1.0338, and  dropped to a low of 1.0177.  The pair then retraced,    climbing sharply to 1.0487, and  closed at 1.0477, just  below the resistance line of 1.0482  (discussed last week).

 We begin with  resistance at 1.0874, which has held firm since last August. This is followed by resistance at 1.0718, which last saw action in March. Below, there is resistance at 1.0605, just above the round figure of 1.06. This is followed by resistance at 1.0557, which has held firm since May 2011. Next, the line of 1.0482 is providing weak resistance, just above 1.0477, where the pair ended the week.

The pair is receiving weak support at 1.0402. This line had acted as resistance since May, when AUD/USD went on a sharp slide. Next, 1.0340 is the providing support. Below is the line of 1.0230. It has strengthened as the pair is trading at higher levels.

The next line of support is 1.0174. This line stood firm as AUD/USD dropped sharply during the week. This is followed by support at 1.0080, which is now protecting the psychologically important parity level. The parity line is the next line of support, and was last tested in June. The next support level is 0.9917. This is followed by support at 0.9860. This final support line for now is 0.9780, which has not been tested since early June.

I am bullish on AUD/USD.

This week was marked by a lot of volatility by the pair, but the aussie did manage to make some gains against   the greenback. Given the turmoil in Europe and sluggishness in the US economy, the Australian dollar could make further gains, especially if the Australian economy can produce some strong data.

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 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.