AUD/USD Forecast Oct. 28-Nov. 1 – Aussie loses ground, Investors eye CPI, Chinese manufacturing PMIs

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AUD/USD climbed to 6-week highs early last week, but was unable to consolidate and lost ground last week. This week features CPI and Chinese manufacturing PMIs. Here is an outlook at the highlights and an updated technical analysis for AUD/USD.

There were no major Australian events last week. The manufacturing and services PMIs were both just above the 50-level, which separates expansion from contraction. This points to weakness in the manufacturing and services sectors.

In the U.S, manufacturing data continues to sputter. Core durable goods orders fell by 0.3%, the second decline in three months. The headline reading declined by 1.1%, its first decline in four months. The manufacturing PMI improved to 51.5, above the estimate of 50.7. Still, this points to minimal expansion.
AUD/USD daily graph with support and resistance lines on it. Click to enlarge:
  1. CPI Data: Wednesday, 0:30.  CPI rebounded in the second quarter, with a gain of 0.6%. This marked its strongest gain since Q4 of 2017. The estimate for Q3 stands at 0.5%. Trimmed CPI, which excludes the most volatile items included in CPI, is projected to repeat the 0.4% gain seen in Q2.
  2. Building Approvals: Thursday, 0:30. This indicator has sputtered, posting five declines in the past six months. The August release came in at -1.1%, short of the forecast of 2.1%. Investors are expecting a small gain of 0.1% in September.
  3. Private Sector Credit: Thursday, 0:30. Credit levels for consumers and individuals remain at low levels. The previous release came in at 0.2%, matching the estimate. The indicator is expected to tick up to 0.3% in August.
  4. Chinese Manufacturing PMI: Thursday, 1:30. China’s manufacturing sector has weakened due to the ongoing U.S-China trade war. The manufacturing PMI has been just below the 50-level since May, which points to stagnation in manufacturing. The index came in at 49.8 in September and the estimate for October is 49.9 points.   
  5. AIG Manufacturing Index: Thursday, 21:30. The index has been gaining ground and improved to 54.7 in September, pointing to expansion. Will the upward trend continue in October?
  6. Chinese Manufacturing PMI: Friday, 1:45. This manufacturing indicator was slightly stronger in September than the official manufacturing PMI. The index registered 51.4, which indicated a slight expansion. The forecast for the October release is 51.0 points.

*All times are GMT

Technical lines from top to bottom:

We start with resistance at 0.7165. This line has held firm since early April.

0.7085 was a low point in September. 0.7022 is next.

0.6988 marked the low point in April.

0.6865 is a weak resistance line.

0.6825 (mentioned last week) is fluid. Currently, it is an immediate resistance line.

0.6744 is providing support.

0.6686 was a cap back in January 2000.

0.6627 has held in support since March 2009. 0.6532 is next.

0.6456 is the final support level for now.

I remain bearish on AUD/USD

The Australian dollar has gained 1.0% in the month of October, but these gains have been more a case of weakness on the part of the U.S. dollar, rather than strong Australian numbers. The U.S-China trade war continues to hamper Australia’s export industry and the recent rate cuts by the RBA have made the Australian dollar less attractive to investors.

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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.