AUD/USD Forecast Jan. 7-11 – Aussie jumps as Powell preaches caution

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The Australian dollar started 2019 with a winning week, thanks to strong gains of 1.5% on Friday. The key event in the upcoming week is retail sales, the primary gauge of consumer spending. Here is an outlook for the highlights of this week and an updated technical analysis for AUD/USD.

Risk appetite improved after Fed Chair Jerome Powell sought to reassure the financial markets with regard to rate policy. Powell said he was aware of the risks of a slowdown in the U.S. economy and that the Fed would be patient in its policy decisions. The comments helped boost the Aussie last week, after sustaining losses of 4.5% in December.

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

  1. AIG Manufacturing Index: Sunday, 21:30. The manufacturing sector suffered a sharp drop in November, as the reading of 51.3 pointed to stagnation in the industry. Will we see a rebound in December?
  2. Trade Balance: Tuesday, 00:30. Australia continues to post trade surpluses, but dipped in October to A$2.32 billion. The downturn is expected to continue in November, with an estimate of A$2.18 billion.
  3. ANZ Job Advertisements: Tuesday, 00:30. This minor indicator has posted three declines in the past four months, with a reading of -0.3% in November.
  4. AIG Services Index: Tuesday, 21.:30. The indicator climbed to 55.1 in November, pointing to strong expansion. This was the highest level since June.
  5. Building Approvals: Wednesday, 00.:30. This key indicator has posted three declines in the past four months. Another decline is expected in November, with an estimate of -0.3%.
  6. AIG Construction Index: Wednesday, 21.:30. This minor indicator has dropped for four straight months, and is well below the 50-level, which separates contraction and expansion.
  7. Retail Sales: Friday, 00.:30. The week winds up with this key event, which should be treated as a market-mover. Retail sales gained 0.3% in October, and an identical gain is expected in the November release.

*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:

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.

0.6775 is the next support level. Below, 0.6686 was an important cap back in January 2000.

I am bullish on AUD/USD

The Aussie’s strong gains last week were all the more impressive, after the Apple revenue warning put a chill in risk appetite early in the week. With U.S. and Chinese trade negotiators meeting this week, investors remain hopeful that tensions in the bitter trade war will ease.

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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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