AUD/USD Forecast May 25-29 – Aussie Recovers Despite Corona Crunch on Economy

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The Aussie rebounded last week, as AUD/USD jumped close to 2 percent. The upcoming week has three eventsHere is an outlook at the highlights and an updated technical analysis for AUD/USD.

The RBA minutes noted that Australia is facing an “unprecedented” economic contraction due to Corvid-19. At the same time, policymakers stated that the economic blow could be softened with substantial fiscal and monetary stimulus. Retail sales plunged in March, with a decline of 17.9 percent. Manufacturing PMI dipped to 42.8, while Services PMI came in at 25.5, pointing to sharp contraction.

In the U.S., construction numbers softened in April. Building Permits fell to 1.07 million, down from 1.35 million. Housing starts slowed to 0.89 million, down from 0.95 million. In March, the final read for Manufacturing PMI came in at 41.5 points, and the initial estimate for April came in at 39.8 points. A reading below the 50-level points to contraction.
AUD/USD daily graph with support and resistance lines on it. Click to enlarge:
  1. Construction Work Done: Wednesday, 1:30. The quarterly report on the construction sector will provide some insights into the current slowdown. The indicator has posted six straight declines, and Q4 came in at -3.0%, worse than the estimate of -1.0%. The downward trend is expected to continue, with an estimate of -1.5 percent.
  2. Private Capital Expenditure: Thursday, 1:30. The all-important quarterly measure reflects investment in the private sector and it is closely watched by the Reserve Bank of Australia. The indicator has failed to post any gains since 2018 and declined by 2.8% in Q4. Analysts had expected a gain of 0.5%. Little change is projected for Q1 of 2020, with a forecast of 2.7 percent.
  3. Private Sector Credit: Friday, 1:30. More credit to the private sector results in enhanced economic activity. Credit levels jumped 1.1% in February, crushing the estimate of 0.3%. Another gain is expected in March, with an estimate of 0.6%.

AUD/USD Technical Analysis

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Technical lines from top to bottom:

0.6825 supported the pair in late 2016 and early 2017.

0.6744 was a low point in January.

0.6627 has held in resistance since early March.

0.6560 is an immediate resistance line.

0.6456 is providing support.

0.6380 (mentioned last week) was tested in the first week of May.

0.6240 is the final support level for now.

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I am neutral on AUD/USD

In the near-term, the outlook for the Australian dollar is negative. The currency has shown strong volatility since the Corvid-19 pandemic, and the significant movement could continue.

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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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