AUD/USD showed some downward movement, but ended the week unchanged, as the pair closed at 0.9315. This week’s major event is Private Capital Expenditure. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.
The Aussie dipped after RBA Governor Glenn Stevens sounded somewhat downbeat, as he stated that in the present economic environment, the economy needed an injection of confidence rather than lower interest rates. Stevens also warned that the risk of the Australian dollar dropping to lower levels was “underestimated”. In the US, there was good news on the employment, manufacturing and housing fronts last week, pointing to balanced growth in the economy. There was a lot of hype leading up to Janet Yellen’s speech at Jackson Hole on Friday, but the Fed chair focused on the US employment picture and didn’t provide any clues about the timing of an interest rate.Updates:
AUD/USD graph with support and resistance lines on it. Click to enlarge:
- Construction Work Done: Monday, 1:30. This indicator, released each quarter, is an important gauge of the strength of the construction industry. The indicator posted a gain of 0.3% in Q1, well above the estimate of -0.3%. The markets are bracing for a downturn in the Q2 release, with the estimate standing at -0.4%.
- HIA New Home Sales: Thursday, Tentative. This is a minor event which is unlikely to have much effect on the movement of AUD/USD. The indicator has posted gains throughout 2014, with one exception. In June, the indicator posted a solid gain of 1.2%.
- Private Capital Expenditure: Thursday, 1:30. Private Capital Expenditure, released each quarter, is the key event of the week. Increased capital spending is an important component of economic growth and is carefully monitored by analysts. The indicator is coming off two sharp declines, and another drop is expected in Q2, with an estimate of -0.8%.
- Private Sector Credit: Friday, 1:30. This event gauges the amount of borrowing in the private sector, and is of interest since there is a strong correlation between borrowing and spending. The indicator has matched or beaten the estimate in recent readings, and posted a strong gain of 0.7% last month. The forecast for the July reading stands at 0.5%.
* All times are GMT.
AUD/USD Technical Analysis
AUD/USD opened the week at 0.9314 and quickly touched a high of 0.9344, as resistance held firm at 0.9369 (discussed last week). The pair then reversed directions, dropping to a low of 0.9235. AUD/USD recovered and closed the week at 0.9315.
Live chart of AUD/USD:
Technical lines from top to bottom:
We start with resistance at 0.9757. This line marked the start of a rally by the US dollar back in October 2013, which saw the pair drop as low as 0.8650.
This is followed by the round number of 0.9622, which has held firm since October 2013.
0.9526 provided key resistance in November 2013 and has remained intact since that time.
0.9441 marked the high point of the pair in November, which saw the Aussie go on a sharp slide and drop below the 0.89 line.
0.9369 held firm for a second straight week. This line could see further action during the week if AUD/USD moves higher.
0.9279 remains an immediate support level. 0.9175 is next.
The round number of 0.9000 is a key psychological level. It has remained intact since early March.
0.8891 is the final support level for now. It has provided strong support since February.
I am bearish on AUD/USD.
The Australian and US economies seem to be going in opposite directions. RBA Governor Glenn Stevens didn’t sound positive about the Australian economy, while the Federal Reserve is expected to raise rates sometime next year, as the US recovery deepens. US GDP for Q2 is expected to be close to 3.9%, and a strong reading could give a broad boost to the US dollar.
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- USD/CAD (loonie), check out the Canadian dollar.