AUD/USD Forecast June 3-7 – Aussie holds own despite soft Australian, Chinese data

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AUD/USD had a quiet week, posting slight gains. It’s a busy week, with 11 events on the calendar. Here is an outlook for the highlights of this week and an updated technical analysis for AUD/USD.
Australian data disappointed last week. Building Approvals fell 4.7% in April, after a sharp drop of 15.5% in March. Private Capital Expenditure dropped 1.7% in Q1, its third decline in the past four quarters. As well, Chinese manufacturing PMI slowed to 49.4, short of the estimate of 49.9. This score points to contraction in Chinese manufacturing.
Tensions between the U.S. and China remain high, with no talks scheduled between the sides. On Friday, President Trump threatened to slap tariffs on all Mexican products, due to the illegal immigration problem. Although Trump said that tariffs would be set at just 5%, stock markets reacted with sharp losses, and new tariffs between the U.S. and Mexico could dampen risk appetite and weigh on the Australian dollar.

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

https://www.tradingview.com/x/OFBAmfQH/

  1. AIG Manufacturing Index: Sunday, 22:30. The index hit a 6-month high in April, with a score of 54.8. Will the May reading also point to expansion?
  2. MI Inflation Gauge: Monday, 1:00. This Melbourne Institute indicator helps analysts track inflation on a monthly basis. Inflation slowed to 0.2% in April, as inflation levels remain well below the RBA target of 2%.
  3. Company Operating Profits: Monday, 1:30. Corporation profits disappointed in Q4 of 2018, slowing to 0.8%. This was the weakest reading in over a year, and missed the forecast of 3.1%. Better news is projected for Q1, with an estimate of 2.9%.
  4. Chinese Caixin Manufacturing PMI: Monday, 1:45. Chinese Manufacturing PMI contracted in April, and Caixin Manufacturing PMI was only a little better, with a score of 50.2. The estimate for May stands at 50.0, pointing to another month of stagnation in the manufacturing sector.
  5. Retail Sales: Tuesday, 1:30. Retail sales is the primary gauge of consumer spending, a key driver of economic growth. The indicator slowed to 0.3% in April and the downturn is expected to continue, with a forecast of 0.2%.
  6. Current Account: Tuesday, 1:30. Australia continues to post current account deficits. The deficit in Q4 of 2018 narrowed to A$7.2 billion, its lowest level in two years. The deficit for Q1 in 2019 is expected to fall to A$2.9 billion.
  7. Rate Decision: Tuesday, 4:30. The RBA has maintained rates at 1.50%, despite the weaker economy. However, the bank is expected to cut rates to 1.25% at the upcoming meeting. A dovish rate statement could send the Aussie to lower levels.
  8. AIG Services Index: Tuesday, 22:30. The services index has been mired in contraction territory for four months, as the services sector continues to struggle.
  9. GDP: Wednesday, 1:30. Australian GDP slowed to 0.2% in Q4 in 2018, its weakest showing since Q3 of 2016. The economy is expected to improve to 0.4% in Q1.
  10. Trade Balance: Thursday, 1:30. The trade surplus has widened for four successive months, improving to A$4.95 billion, above the estimate of A$4.49 billion. The upward trend is expected to continue, with an estimate of A$5.05 billion.
  11. Construction Index: Thursday, 22:30. The construction index has been below the 50-level since August, as the construction sector remains in contraction mode.

*All times are GMT

AUD/USD Technical Analysis

Technical lines from top to bottom:

We start with the round number of 0.74 was the high point reached at the wake of December. This is followed by 0.7340, which the pair breached in late November.

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.

0.6988 is the next resistance line. It marked the low point in April.

0.6825 supported the pair in late 2016 and early 2017.

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

The U.S-China trade war remains full-blown and the crisis could continue for some time, with no new talks scheduled between the parties. The Chinese manufacturing sector is in trouble, which is bad news for the Australian economy, which is heavily dependent on China.

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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.