AUD/USD lost close to a cent last week, as the pair closed just above the 0.93 level. This week’s highlights are Retail Sales and Employment Change. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.
Australian Building Approvals and PPI both posted declines in June, hurting the Australian dollar. In the US, consumer confidence and manufacturing data were strong, but Nonfarm Payrolls took a tumble in June and was well off expectations.
[do action=”autoupdate” tag=”AUDUSDUpdate”/]AUD/USD graph with support and resistance lines on it. Click to enlarge:
- Chinese Non-Manufacturing PMI: Sunday, 00:59. The PMI dipped to 53.4 points last month, but the index remains well above the 50-point line, which marks expansion. The Australian dollar is sensitive to key Chinese data, as China is Australia’s number one trading partner.
- MI Inflation Gauge: Monday, 00:30. Inflation Gauge, which is released monthly, helps analysts track CPI, which is released each quarter. The indicator has been on a downward trend, and posted a flat 0.0% reading last month, its worst showing in almost a year.
- Retail Sales: Monday, 1:30. This is the first key events of the week. The indicator surprised with a 0.5% decline last month, its first drop since April 2013. The markets are expecting a turnaround in the July release, with the estimate standing at 0.3%.
- ANZ Job Advertisements: Monday, 1:30. Job Advertisements is an important gauge of activity on the employment front. The indicator bounce back last month with a strong gain of 4.3%. The markets will be hoping for another solid outing in the upcoming release.
- AIG Services Index: Monday, 23:30. The index has been mired below the 50-point level since February, indicative of ongoing contraction in the services sector. No significant change is expected in the July release.
- Trade Balance: Tuesday, 1:30. Trade Balance is closely linked to currency demand, as foreigners must purchase Australian dollars in order to purchase Australian exports. Australia has posted two consecutive declines and the markets are expecting another drop in the July release, with an estimate of -$2.00 billion.
- Cash Rate: Tuesday, 4:30. The benchmark rate has been pegged at the relatively low rate of 2.50% since July 2013. No change is expected in the rate this month, despite the RBA’s misgivings about the high value of the Australian dollar. The RBA will communicate the new rate in a Rate Statement.
- AIG Construction Index: Wednesday, 23:30. The index has been pointing to ongoing contraction in the construction sector, with readings below the 50-point level. However, there was good news last month as the index broke through this barrier and climbed to 51.8 points. The markets will be hoping for another strong reading this time around.
- Employment Change: Thursday, 1:30. This key indicator can have a strong impact on the direction of AUD/USD. The indicator bounced back last month with a strong gain of 15.9 thousand, beating the estimate of 12.3 thousand. The markets are expecting another strong gain, with an estimate of 13.5 thousand. The unemployment rate is expected to remain unchanged at 6.0%.
- RBA Monetary Policy Statement: Friday, 1:30. The RBA policy statement, released each quarter, follows on the heels of the interest rate decision. It provides insight into the factors that led to the rate decision, and traders should treat the indicator as a market-mover.
- Home Loans: Friday, 1:30. Home Loans provides a snapshot of activity in the housing sector. The indicator has been listless, with two consecutive readings of 0.0%. The markets are expecting a strong improvement in the upcoming release, with an estimate of 0.7%.
- Chinese Trade Balance: Friday, Tentative. The indicator slipped to $31.6 billion last month. Although this was a strong reading, it fell well shy of the estimate of $37.3 billion. The downward trend is expected to continue in July, with the forecast standing at $26.0 billion.
- Chinese CPI: Saturday, 1:30. Chinese CPI is the primary gauge of consumer inflation and can affect the movement of AUD/USD. The indicator slipped to 2.3% last month, and an identical reading is expected in the July release.
AUD/USD Technical Analysis
AUD/USD opened the week at 0.9400 and quickly touched a high of 0.9416. The pair then reversed directions, dropping to a low of 0.9275 and breaking below support at 0.9282 (discussed last week). The pair closed the week unchanged at 0.9309.
Live chart of AUD/USD: [do action=”tradingviews” pair=”AUDUSD” interval=”60″/]
Technical lines from top to bottom:
We start with resistance at 0.9910, which has remained firm since last May.
0.9757 marked the start of a rally by the US dollar back in October 2013, which saw the pair drop as low as 0.8650.
This is followed by the round number of 0.9700, which has held firm since October 2013.
0.9526 provided key resistance in November 2013 and has remained intact since that time.
0.9441 held firm last week as the pair pushed above the 0.94 line before retracting. This line marked the high point of the pair in November, which saw the Aussie go on a sharp slide and drop below the 0.89 line.
0.9369 was breached as the pair posted sharp losses. It has switched to a resistance role and is currently a weak line.
0.9279 has weakened in support as the pair trades at lower levels. It could break early in the week if the Australian dollar continues to lose ground. 0.9179 is the next support level.
The round number of 0.9000 is a key psychological level. It has remained intact since early March.
The final support line for now is 0.8891. AUD/USD broke above this line in February and it has provided strong support since then.
I am bearish on AUD/USD.
The Australian dollar had enjoyed an uneventful summer, but was swept lower last week by the broadly-stronger US dollar. The Australian economy remains fragile and the RBA would love to see the Aussie lose ground, although a rate decrease is unlikely. So, we could see the greenback’s rally continue this week.
- 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.