AUD/USD was unchanged last week, closing at 0.7627. This week’s key events include Retail Sales, Trade Balance and the Cash Rate. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.
President Trump’s glaring failure to pass his healthcare bill and the Fed’s dovish outlook weighed on the US dollar. At the same time, US numbers remain strong, buoyed by a solid Final GDP report. There were no major releases out of Australia last week.Updates:
AUD/USD daily graph with support and resistance lines on it. Click to enlarge:
- AIG Manufacturing Index: Sunday, 23:00. The index jumped to 59.3 in January, pointing to strong expansion in the manufacturing sector. Will this be followed by another solid release in February?
- MI Inflation Gauge: Monday, 1:00. This monthly indicator helps analysts track CPI, which is released each quarter. The index declined 0.3% in January, its first decline in 7 months. Will we see a rebound in the February report?
- Retail Sales: Monday, 1:30. This key event should be treated as a market-mover. Retail Sales improved to 0.4% in December, matching the forecast. The estimate for January stands at 0.3%.
- Building Approvals: Monday, 1:30. This indicator tends to show strong fluctuation, making accurate forecasts difficult. In December, the indicator rose 1.8%, beating the estimate of -0.1%. The markets are braced for a decline of 1.4% in January.
- Commodity Prices: Monday, 6:30. The indicator has now improved in 9 straight readings, as stronger global conditions have increased demand for Australian exports. In January, the indicator improved to 56.0%.
- Trade Balance: Tuesday, 1:30. Australia’s trade surplus dropped to A$1.30 billion in December, well short of the forecast of A$3.82 billion. The surplus is expected to climb to A$1.75 billion in January.
- Cash Rate: Tuesday, 4:30. The RBA is expected to hold rates at 1.50%, where they have been pegged since August 2016. The markets will be combing carefully through the rate statement, which will provide details explaining the RBA’s decision.
- RBA Governor Philip Lowe Speech: Tuesday, 9:15. Lowe will speak after the Cash Rate release. A hawkish speech could push the Australian dollar to higher levels.
- AIG Services Index: Tuesday, 23:30. The indicator slipped to 49.0 in January, pointing to contraction for the first time since September.
- RBA Assistant Governor Guy Debelle Speech: Wednesday, 22:40. Debelle will speak at a conference in Sydney. The markets will be looking for more details about the factors behind the rate decision earlier in the week.
- AIG Construction Index: Thursday, 23:30. The index improved to 53.1 in January, the first sign of expansion since September. Will we see another strong reading in February?
AUD/USD Technical Analysis
AUD/USD opened the week at 0.7632 and dropped to a low of 0.7587, testing support at 0.7605 (discussed last week). The pair climbed to a high of 0.7679, but failed to consolidate at this level and closed the week at 0.7627.
Live chart of AUD/USD:
Technical lines from top to bottom:
We begin with resistance at 0.8066.
0.7938 is next. This line has held in resistance since May 2015.
0.7835 was the high point in April 2016.
0.7741 was a cap in February.
0.7605 remains busy and was tested in support last week.
0.7513 is providing support. It was a cushion in April 2015.
0.7429 is next.
0.7311 marked a low point in November.
0.7223 is the final support level for now.
I am bearish on AUD/USD
With the RBA unlikely to make a move this week, monetary divergence favors the US dollar. The US economy continues to fire on all cylinders, so sentiment remains favorable for the US dollar.
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