AUD/USD daily graph with support and resistance lines on it. Click to enlarge:
AUD/USD dropped sharply last week, declining 1.8%. There are just four events in the upcoming week. Here is an outlook for the highlights and an updated technical analysis for AUD/USD.
The Australian economy created some 42.3 thousand jobs in May, but this was not enough to bolster the wobbly Aussie. Investors were unhappy with the unemployment rate, which remained at 5.2%, higher than the estimate of 5.1%. Soft Chinese data also weighed on the currency. Chinese industrial output was unexpectedly soft, dropping to its lowest level since 2002. The indicator gained 5.0% in May on an annualized basis, well off the forecast of 5.5%. As well, Chinese auto sales plunged 16.4% in May, its worst monthly decline on record. This marked an 11th successive decline and comes after a 14.6% drop in April.
Australian consumers were in a sour mood in June, according to the Westpac Consumer Confidence indicator. The survey declined in June by 0.6%. This was a disappointment, as analysts had hoped that the recent RBA rate cut would energize the economy and improve consumer confidence
In the U.S., May inflation numbers were soft, as CPI and core CPI came in at 0.1%. As expected, U.S. consumer spending data improved sharply in May. Core retail sales climbed 0.5%, matching the estimate. Retail sales also improved to 0.5%, but fell shy of the forecast of 0.7%. These consumer inflation and consumer spending numbers could play a crucial role in the Federal Reserve’s forward guidance for rates. The markets are prepared for rate cuts in the second half of the year. The CME Group has set the odds of a July cut at 62% and another cut in September at 55%.
- RBA Monetary Policy Meeting Minutes: Tuesday, 1:30. The minutes provide details of the RBA meeting in June, when policymakers cut rates from 1.50% to 1.25%. This marked the first rate cut in almost three years, and a dovish tone to the minutes could send the Aussie lower.
- HPI: Tuesday, 1:30. The housing market remains weak, with the House Price Index rolling off declines in the past four quarters. The fourth-quarter was particularly weak, with a decline of 2.4%. The markets are braced for another sharp decline in Q1, with an estimate of -2.5%.
- CB Leading Index: Tuesday, 14:30. The Conference Board gauge posted a gain of 0.3% in March. Will the April reading show an improvement?
- MI Leading Index: Wednesday, 0:30. The Melbourne Institute indicator declined by 01% in April, marking a 4-month low. The May reading will be released this week.
AUD/USD Technical Analysis
Technical lines from top to bottom:
With AUD/USD sliding last week, we start at lower levels:
0.7240 separated ranges in September and in October.
0.7165 (mentioned last week) has held in resistance since early April.
0.7085 was a low point in September.
0.7022 is the high-point in 2019. It has held since early January.
0.6988 remained relevant during the week. It marked the low point in April.
0.6864 has been an important support level since May. It was tested this week.
0.6744 was a low point in January.
0.6686 was a cap back in January 2000.
0.6547 was an important resistance line back in December 2008.
I remain bearish on AUD/USD
Weak Chinese data this week underscored the slowdown gripping the Chinese economy, which will make it difficult for Aussie to gain ground. As well, the RBA rate cut has made the currency less attractive to investors.
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Further reading:
- EUR/USD forecast – for everything related to the euro.
- GBP/USD forecast – Pound/dollar predictions
- USD/JPY forecast – projections for dollar/yen
- USD/CAD forecast – Canadian dollar analysis
- Forex weekly forecast – Outlook for the major events of the week.
Safe trading!
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