The Australian dollar made considerable gains last week, after suffering sharp losses a week earlier. In the upcoming week, investors will be keeping a close eye on the RBA minutes and employment data. Here is an outlook for the highlights of this week and an updated technical analysis for AUD/USD.
Business and consumer confidence levels headed higher, helping to boost the Australian dollar. NAB Confidence improved to 4 points in January, while Westpac Consumer Sentiment rebounded with a gain of 4.3% in February, after a decline of 4.7% a month earlier. In the U.S., consumer spending had a dismal January, with retail sales and core retail sales recording sharp declines.
Investors are feeling more optimistic over the U.S-China trade war. The sides completed a third round of talks last week, and the big question is will President Trump suspend the March 1 deadline to impose new tariffs on China. The U.S. has threatened to raise tariffs on some $200 billion of Chinese goods from 10% to 25%, but Trump has said he could let the deadline pass if there is progress in the talks.
AUD/USD daily graph with support and resistance lines on it. Click to enlarge:
- Monetary Policy Meeting Minutes: Tuesday, 00:30. The minutes will provide details of the February policy meeting, at which the bank held the benchmark rate at 1.50%. In its rate statement, the RBA revised downwards its GDP forecast and acknowledged risks in the domestic and international markets.
- MI Leading Index: Tuesday, 23:30. The Melbourne Institute indicator has struggled, posting three declines in the past four months. Will we see an improvement in the January release?
- Wage Price Index: Wednesday, 00:30. Wage prices have been steady, posting gains of 0.6% in three of the past four quarters. Another gain of 0.6% is expected in the fourth quarter.
- Flash Manufacturing PMI: Wednesday, 22:00. The manufacturing continues to show expansion. The indicator improved to 54.3 points in December.
- Employment Data: Friday, 00:30. Australia’s labor market remains solid. The economy created 21.6 thousand jobs in December, beating expectations. The estimate for January stands at 15.6 thousand. The unemployment rate is forecast to remain pegged at 5.0%.
- RBA Governor Lowe Speaks: Lowe will testify before the House of Representatives’ Standing Committee on Economics. if Lowe’s remarks are more hawkish than expected, the Aussie could gain ground.
*All times are GMT
AUD/USD Technical Analysis
It was a relatively quiet week for the AUD/USD. On Friday, the pair tested support at 0.7085 (mentioned last week). on Friday, but rebounded and ended the week with gains.
Technical lines from top to bottom:
We start with resistance at 0.7480, which capped the pair in mid-July and defends the round 0.75 level.
Next is the round number of 0.74, the high point reached at the wake of December. This is followed by 0.7340, which the pair breached in late November.
0.7315 was a swing high seen in late September. Further down, 0.7240 separated ranges in September and in October. 0.7190 marked a low point in the first week of December.
Lower, 0.7165 was a swing low after a recovery in mid-November. 0.7085 was a low point in September and protected the symbolic round number of 0.70.
Close by, 0.6970 played a role back in January 2017.
Below, 0.6825 supported the pair in late 2016 and early 2017.
0.6744 was a low point in January.
I am bullish on AUD/USD
The U.S.-China trade spat has weighed on the Australian economy, but investors remain hopeful that a deal will be reached. f there are tangible signs of progress, risk appetite will jump, which would be bullish for the Aussie.
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