AUD/USD rebounded last week, gaining 100 points. The pair closed the week at 0.7578. This week’s highlights are the RBA interest rate decision and Retail Sales. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.
Australian CPI rebounded with a gain of 0.4%, giving the pair a brief boost. In the US, the Fed was cautiously optimistic but did not provide any hints regarding the timing of a rate hike. The greenback lost ground in response to a poor GDP report: a gain of just 1.2%, well short of the estimate of 2.6%.
[do action=”autoupdate” tag=”AUDUSDUpdate”/]AUD/USD graph with support and resistance lines on it. Click to enlarge:
- AIG Manufacturing Index: Sunday, 23:30. Throughout 2016, the index has remained above the 50-level, which separates contraction from expansion. In June, the indicator improved to 51.8 points.
- HIA New Home Sales: Monday, 1:00. HIA New Home Sales provides a snapshot of the level of activity in the housing sector. The indicator has looked weak, posting three declines in the past four months. Will we see an improvement in the June release?
- Chinese Manufacturing PMI: Monday, 1:00. The PMI has been stuck at the 50 line for the past four months, indicative of a stagnant manufacturing sector. No change is expected in the upcoming release.
- Building Approvals: Tuesday, 1:30. Building Approvals disappointed in May, posting a sharp decline of 5.2%. This was considerably lower than the forecast of -3.6%. The markets are expecting a strong turnaround in the June release, with an estimate of +0.9%.
- Trade Balance: Tuesday, 1:30. Trade Balance is closely linked to currency demand. The trade deficit of A$2.22 was much higher than estimated, as the forecast stood at A$1.72 billion. The estimate for the June release stands at the round number of A$2.00 billion.
- Cash Rate: Tuesday, 4:30. The RBA will set interest rates and release a rate statement. The markets are expecting a quarter point cut, from 1.75% to 1.50%. Whether the bank lowers rates or stays on the sidelines, we could see some movement from AUD/USD.
- Commodity Prices: Tuesday, 6:30. Commodity Prices continues to drop, although the declines have been less severe in recent months. The June reading came in at -9.9%, almost unchanged from a month earlier.
- AIG Services Index: Tuesday, 23:30. The index is pointing to muted movement in the services sectors, with two straight readings slightly above the 50-line. Will we see some improvement in the upcoming release?
- Retail Sales: Thursday, 1:30. Retail Sales is the primary gauge of consumer spending, and should be treated as a market-mover. The indicator has posted two straight gains of 0.2%. Little change is expected in the June reading.
- AIG Construction Index: Thursday, 23:30. The indicator jumped to 53.2 points in June, marking a 10-month high. However, most of the releases in 2016 have been below the 50- level, which indicates contraction in the construction sector.
- RBA Monetary Policy Statement: Friday, 1:30. The week wraps up with the RBA statement, which is released every quarter. The markets will be looking for clues regarding the bank’s future monetary policy.
* All times are GMT
AUD/USD Technical Analysis
AUD/USD opened the week at 0.7473 and dropped to a low of 0.7416. The pair then reversed directions and climbed to a high of 0.7610 late in the week, testing resistance at 0.7597(discussed last week). AUD/USD closed the week at 0.7578.
Live chart of AUD/USD: [do action=”tradingviews” pair=”AUDUSD” interval=”60″/]
Technical lines from top to bottom:
We begin with resistance at 0.7938.
0.7835 has provided resistance since April.
0.7692 is protecting the 0.77 line.
0.7597 was tested last week and is currently a weak resistance line
0.7513 was a cap in May and June
0.7438 is providing support
0.7334 was a cap in December 2015.
0.7192 is providing strong support.
0.7105 has been a cushion since the end of February. It is the final support level for now.
I am bearish on AUD/USD
The markets are expecting rate cut from the RBA. Although this is priced in, the magnitude of such a move could well push the Aussie lower. In the US, the GDP was disappointing, but some positive data will renew speculation about a rate hike.
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Further reading:
- 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 Canadian dollar (loonie), check out the Canadian dollar forecast.
- For the kiwi, see the NZD/USD forecast.
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