The Australian dollar was almost unchanged at the end of the week, closing at 1.0264. AUD/USD did break above the 1.03 line, but was unable to sustain that move. This week’s highlights include Building Approvals and PPI. Here is an outlook of the events and an updated technical analysis for AUD/USD.
AUD/USD showed little change as both the US and Australia posted some weak key numbers. Australian CPI missed the estimate, while the US continued to release disappointing numbers, notably GDP, which fell well short of expectations.
Updates: Private Sector Credit came in at 0.2%, just below the estimate of 0.3%. AIG Manufacturing Index will be released later on Tuesday. AUD/USD is steady, as the pair was trading at 1.0335. AIG Manufacturing Index dropped sharply from 44.4 points to 36.7 points,. HIA New Home Sales bounced back from a 5.3% decline, rising 4.2%. Chinese Manufacturing PMI came in at 50.6 points, just shy of the forecast of 50.8 points. RBA Assistant Governor Malcolm Edey spoke at a conference in Sydney. Commodity Prices declined 6.5%, better than the previous release of -7.5%. Building Approvals looked awful, plunging 5.5%. The estimate stood at 1.2%. Import Prices came in at 0.0%, beating the forecast of -0.5%. PPI will be released on Friday. AUD/USD continues to fall sharply, as the pair was trading at 1.0229.
AUD/USD graph with support and resistance lines on it. Click to enlarge:
Private Sector Credit: Tuesday, 1:30. This indicator is an important measure of consumer spending, as consumers will increase borrowing if they are spending more money. The indicator has risen a modest 2% in the past two readings. The markets are expecting a 0.3% gain in the April release.
Chinese Manufacturing PMI: Tuesday 21:00. This key index has been pointing just above the 50 level throughout 2o13, indicating very modest growth in the manufacturing sector. The markets are expecting little change in the April reading, with an estimate of 50.8 points. Chinese key events should be treated as market-movers for the Aussie, since China is Australia’s most important trading partner.
AIG Manufacturing Index: Tuesday, 23:30. The index has been below the 50-point level since February 2012, indicating ongoing contraction in the Australian manufacturing sector. The previous reading dropped to 44.4 points, and the markets will be hoping for a stronger reading in the upcoming release.
HIA New Home Sales: Wednesday, Tentative. This important housing indicator posted a sharp drop of 5.3% in the April release. This was a major disappointment, as it was the first decline since October 2012. Will the indicator rebound in the May release?
RBA Assistant Governor Malcolm Edey Speaks: Wednesday, 3:25. Edey will address a regulatory conference in Sydney. A speech that is more hawkish than expected is bullish for the Australian dollar.
Commodity Prices: Wednesday, 6:30. The global slowdown continues to take its toll on the Australian export sector, and this is underscored by the continuing decline in Commodity Prices. The indicator dropped 7.5% in the April reading, and the markets are not expecting a substantial change this time around.
Building Approvals: Thursday, 1:30. This key construction indicator tends to fluctuate sharply, making accurate predictions a tricky task. In April, the indicator jumped 3.1%, beating the estimate of 2.4%. The markets are expecting a smaller gain in the May reading, with a forecast of 2.4%.
Import Prices: Thursday, 1:30. Import Prices is released each quarter, and is an important contributor to business and consumer inflation. The indicator rose 0.3% in the previous reading, but the markets are expecting a decline of 0.4% in the upcoming release.
AIG Services Index: Thursday, 23:30. This index has not crossed above 50 since February 2012, pointing to ongoing contraction in the services sector. However, the index did has been showing improvement in the past three releases, reaching 49.6 points in the April reading. Will the indicator push above the 50 line in the upcoming reading?
PPI: Friday, 1:30. PPI is one of the most important consumer inflation indicators, and should be treated as a market-mover. The index posted a modest gain of 0.2% in April. The estimate for the May release stands at 0.3%.
AUD/USD Technical Analysis
AUD/USD opened at 1.0273, and dropped to a low of 1.0231. The pair then rebounded, pushing above 1.03, and touching a high of 1.0339. However, the Aussie couldn’t maintain these gains, and closed the week at 1.0264, as the support line of 1.0260 (discussed last week) held firm.
Technicallines from top to bottom:
We begin with resistance at 1.0739. This line has remained intact since March 2012, when the Australian dollar started a steep drop which saw it fall well below parity. The is followed by 1.0605. The pair has not tested this line since September. Below, there is resistance at 1.0508. Next, 1.0416 was serving in a support role earlier in the month, but is now providing strong resistance, as the pair trades at lower levels. This is followed by resistance at 1.0326, which was briefly breached as the pair pushed higher before retracting.
AUD/USD continues to receive support at 1.0260. The pair broke through this line as the Aussie lost ground, but it remained intact at the end of the week. Below, the pair is receiving support at 1.0174. This line has held steady since early March. We next encounter support at the line of 1.0080, which is protecting the parity level. This is followed by support at the parity line, which has held steady since June and is a psychologically significant barrier. Next, there is support at 0.9907. The final support level is at 0.9795, which has held firm since June 2012.
I continue to be bearish on AUD/USD.
Australian numbers have not been strong, and the RBA has left the door open for more interest rate cuts, which would hurt the Aussie. Weak US numbers are sending nervous investors to the safe-haven greenback, and if the US continues to post disappointing data, we could see the pair move closer to the parity line.
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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