AUD/USD rebounded sharply last week, posting gains of 2.1%. It is a light schedule on the fundamental front, with three events in the upcoming week. Here is an outlook at the highlights and an updated technical analysis for AUD/USD.
The RBA wasted no time in following the Federal Reserve’s lead, as the bank trimmed rates by 0.25%, to 0.50%. The Aussie actually gained ground after the move, as investors were pleased to see that central banks were coordinating their moves.
Australian data was mixed last week. Building Approvals plunged 15.3% in January, the third decline in three weeks. This figure was well off the estimate of a gain of 0.1%. GDP improved to 0.5% in Q4, up from 0.4% in the third quarter. The week ended on a sour note, as retail sales fell by 0.3%, marking a second successive decline. The forecast stood at zero.
- NAB Business Confidence: Tuesday, 0:30. Business confidence has been in negative territory for the past two releases, as there is pessimism over the impact that the coronavirus will have on the Australian economy. Will we see an improvement in February?
- Westpac Consumer Sentiment: Tuesday, 23:30. Consumer confidence rebounded in February with a gain of 2.3%, after back-to-back declines. We now await the March data.
- MI Inflation Expectations: Thursday, 0:00. The Melbourne Institute gauge of Inflation expectations is a useful gauge for tracking actual inflation figures. In January, the indicator slowed to 4.0%, down from 4.7% a month earlier. Will the downturn continue in the February reading?
AUD/USD Technical Analysis
Technical lines from top to bottom:
We start with 0.7085, which has held since July. This is followed by 0.7022.
0.6960 is protecting the 0.70 line, which has psychological significance.
0.6865 (mentioned last week) is next, followed by 0.6744.
0.6627 is an immediate support level.
0.6560 has switched to support following strong gains by AUD/USD last week.
0.6456 is next.
0.6380 has held in support since 2009.
0.6240 is the final support line for now.
I remain bearish on AUD/USD
The coronavirus continues to disrupt the global economy, especially in China and other Pacific countries, including Australia. China is Australia’s largest trading partner, so the economic toll of the outbreak will be felt in Australia for some time to come.
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