AUD/USD Forecast Jan. 14-18 – Aussie gains ground on dovish Fed, stronger risk appetite


The Australian dollar posted gains for a second straight week, as the currency has started 2019 in fine form. This week’s key event is consumer confidence. Here is an outlook for the highlights of this week and an updated technical analysis for AUD/USD.

After a dismal December, the Aussie is showing strength in December. Federal Reserve policymakers have sounded dovish about rate hikes in 2019, and the minutes from the December meeting reiterated that the Fed would be patient and prudent before any further hikes.

Stronger risk appetite has also boosted the Australian dollar, a risk currency. Investors were enthusiastic about last week’s trade talks between U.S. and Chinese officials, which reportedly made minor progress.

Australian retail sales posted a gain of 0.4%, above the estimate of 0.3%. This was its strongest gain in five months and bolstered the Aussie on Friday.

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

  1. Australian Inflation: Monday, 00:00. The Melbourne Institute’s inflation Gauge is a useful monthly indicator, as the authorities release official CPI data only once per quarter. The indicator has been dropping and fell to zero in November. Inflation Expectations, which measures consumer expectations for inflation over the next 12 months, improved to 4.0% in November.
  2. Westpac Consumer Sentiment: Tuesday, 23:30. This key indicator tends to show significant volatility, The indicator posted a weak gain of 0.1% in December, after a jump of 2.6% a month earlier.
  3. Home Data: Thursday, 00:30. The week winds up with housing numbers. Home Loans is expected to slide 1.4% in November, after a strong gain of 2.2% a month earlier. New Home Sales has also showed strong swings, and jumped 3.6% in November.

*All times are GMT

AUD/USD Technical Analysis

AUD/USD lost ground right after New Years’ Day, but rallied later in the week. On Friday, AUD/USD broke through resistance at 0.7085, mentioned last week).

Technical lines from top to bottom:

0.7612 has been a resistance line since June.

0.7480 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.

I am bullish on AUD/USD

With risk appetite showing a marked improvement, the Aussie has room to make further gains this week. The U.S dollar has been in retreat, and the ongoing government shutdown is also weighing on the greenback. The shutdown has earned the dubious honor of being the longest ever and shows no signs of being resolved.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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