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The Australian dollar  lost about 100 points last week, as the currency continues to struggle against its US counterpart. AUD/USD  closed the week  at 0.8120, its lowest  level since June 2010. The week leading up to Christmas is very quiet, with only one release, CB Leading Index. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

The highlight of the week was the Federal Reserve policy statement. Market analysts noted that previous statements have usually stated that the Fed would maintain low rates for a “considerable time”, but the December statement changed terminology, saying the Fed would be “patient” before raising rates. The statement was followed by a hawkish Yellen, which pushed hard on the Aussie.  Yellen was more clear than the Fed statement, hinting broadly  that the Fed could raise rates as early as the second quarter of 2015. The RBA minutes reiterated that it plans to keep rates at record-low levels for the foreseeable future. In the Mid-Year Economic and Fiscal Outlook, the government noted that the deficit is larger than what was forecast in the May budget.

[do action=”autoupdate” tag=”AUDUSDUpdate”/]

AUD/USD graph with support and resistance lines on it. Click to enlarge:

AUDUSDForecast Dec.22-26

  1. CB Leading Index: Tuesday, 23:00.  This week’s only release is a minor event. as most of the leading indicators tracked by this release have already been published. The indicator has posted two straight declines. Will we see  an improvement  in the  October reading?

* All times are GMT.

AUD/USD Technical Analysis

AUD/USD  started the week  at 0.8210  and  quickly climbed  to a  high of 0.8274, as resistance held at 0.8316 (discussed last week). The pair then reversed directions, dropping to 0.8107.  AUD/USD  closed the week at 0.8120.

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

Technical  lines from top to bottom:

With the Australian dollar sustaining losses, we begin at lower levels:

0.8660 has held firm since late November. 0.8550 is  next.

0.8456 switched to a resistance role in the first week of December, as the AUD continued   on a sharp slide which saw it drop close to the 0.81 line last week.

0.8316 held firm as the Aussie moved higher early in the week before retracting.

0.8150 was breached and has switched to resistance. This line had provided support since June 2010.

0.8013  is the last barrier in front of the psychologically critical line of 0.8000.

0.7978 was an important cap in January 2007.

0.7904 has provided support since July 2009.

0.7799 is the final support level for now. This line has remained intact since September 2008.

I  remain bearish  on AUD/USD.

The Aussie continues to struggle, and the psychologically critical level of 0.80 is fast looming as the pair trades at multi-year lows. Weak global demand continues to hurt the export sector and the RBA, which would like to see the currency in the mid-75 range, has said it has no plans to raise interest rates. Over in the US, the economy continues to improve, and a rate hike is likely just a question of time.

In our latest podcast, we run down all aspects of the Fed decision, discuss the running down of oil, the run down Russian ruble and the weak currency down under:

Download it directly here.

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Further reading: