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After tumbling over three cents two weeks ago, the Australian dollar  recovered nicely and regained almost all of these losses.  AUD/USD  ended the week close to the 0.92 line.  It’s a  very quiet week ahead, with  just 5  releases on the schedule. Here is an outlook of the events and an updated technical analysis for AUD/USD.

Australian Retail Sales and Employment Change  disappointed, but the Aussie still managed to post sharp gains against the US dollar, as  the latter was broadly weaker due to the absence of pro-taper news.

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AUD/USD graph with support and resistance lines on it. Click to enlarge:   AUD USD Aug12-16 Technical Analysis

  1. NAB Business Confidence:  Tuesday, 1:30.  Business Confidence  has been steadily improving, and climbed to  the zero level in the July reading. A reading above zero indicates positive conditions. Will  the indicator push into positive territory in the upcoming reading?
  2. Westpac Consumer Sentiment:  Wednesday, 00:30. Improved consumer confidence  usually translates into  stronger consumer spending,  which is  critical for economic growth.  Consumer  Sentiment tends to fluctuate sharply, resulting in estimates which are often well off the mark. After a strong gain of 4.7% in June, the index declined by -0.1% last month. The markets are hoping that the index can get back on track with a gain in the August release.
  3. Wage Price Index: Wednesday, 1:30. This index has been quite steady and the market estimates quite accurate. The index posted a 0.7% gain in July and the markets are not expecting much of a change in the upcoming release, with an estimate of 0.8%.
  4. MI Inflation Expectations: Thursday, 1:00. MI Inflation Expectations helps analysts  predict actual inflation figures,  so this monthly  indicator is an important inflation indicator. In July, the indicator jumped to its  highest level in a  year, with a  gain of 2.6%.
  5. RBA Assistant Governor Guy Debelle Speaks: Friday, 1:30.Debelle with address a financial forum in Sydney. With the RBA fresh of a rate cut, analysts will be closely monitoring Debelle’s speech and looking for any hints as to the central bank’s future monetary policy. A speech which is more hawkish than expected is bullish for the Australian dollar.

AUD/USD Technical Analysis

AUD/USD  started the week at 0.8912. The pair then touched a low of 0.8907, as the support level of 0.8893 (discussed last week) held firm. The Aussie showed surprising strength, climbing steadily throughout the week, hitting a high of 0.9215. AUD/USD  ended the week close to  the 0.92 line.

Live chart of AUD/USD:   [do action=”tradingviews” pair=”AUDUSD” interval=”60″/]

Technical lines from top to bottom:      

With AUD/USD posting sharp gains, we start at  higher levels.

We  begin with strong resistance at 0.9748, which acted as a cap in early June.

0.9634 saw action in mid-June,  when the pair started a downward slide in which it dropped below the 0.92 line.

0.9549 is the next line of resistance.  This is followed by 0.9428. This line had  played a support  role  since late 2011, but was breached in June, and has provided strong resistance since then.

0.9283  saw    a lot of action in the month of July, alternating between resistance and support. It is currently providing weak resistance, and could be tested early in the week.

AUD/USD  continues to receive support at 0.9180. This line began the week in a resistance role, but could not hold in the face of an impressive rally by the Australian dollar.

0.9041  was providing weak support in the first half of July, but has again gained some breathing room as the AUD/USD trades at higher levels.

The  round number of 90 is next.  This psychologically important  level  has provided support since September 2010, but has seen some action over the past few weeks.

0.8893 has been a steady support line since August 2010, as the Australian dollar put together a strong  rally which saw it  climb  above the 1.10 line. It was briefly breached late last week, but is back in a strong support role as the pair has gained ground.

0.8747  is the final support line for now.  This line has remained in place since July 2010.

I  am bearish on AUD/USD.

The Aussie looked impressive last week, posting sharp gains despite weak domestic data and a rate cut by the RBA. With the AUD/USD losing over three cents the week before last, the volatility could continue, and with the Australian economy continuing to underperform, another strong surge this week by the Australian dollar seems unlikely.

The Aussie sometimes moves in tandem with gold. You can trade binary options on gold using this technical analysis.

Further reading: