AUD/USD was unchanged last week, as the pair closed at 0.7440. This week’s key events are the Cash Rate and GDP. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.
In Australia, key indicators were mixed. Private Capital Expenditure posted a sharp decline of 4.0%, compared to a decline of 2.8%. Retail Sales edged lower to 0.5%, but beat the estimate of 0.3%. In the US, Preliminary GDP sparkled in Q3 with a gain of 3.2%, beating the estimate of 3.0%. Consumer Confidence data easily beat expectations. Employment numbers were mixed, as Nonfarm Payrolls met expectations, but wages declined.
[do action=”autoupdate” tag=”AUDUSDUpdate”/]AUD/USD daily graph with support and resistance lines on it. Click to enlarge:
- AIG Services Index: Sunday, 22:30. The indicator improved to 50.5 points in November, pointing to stagnation in the services sector. Will we see a stronger reading in December?
- MI Inflation Level: Monday, 00:00. The indicator dipped to 0.2% in October, down from 0.4% a month earlier.
- Company Operating Profits: Monday, 0:30. The indicator rebounded in Q2, posting a gain of 6.9%. This easily beat the estimate of 2.1%. The estimate for Q3 stands at 3.1%.
- Current Account: Tuesday, 00:30. Australia’s current account deficit narrowed in Q2 to A$15.5 billion, beating the forecast of A$20.2 billion. The deficit is expected to shrink again in Q3 to A$13.6 billion.
- Cash Rate: Tuesday, 3:30. The RBA has pegged the benchmark interest rate at 1.50% since August and no change is expected at the December meeting. The bank has cut rates by a quarter point twice in 2016.
- AIG Construction Index: Tuesday, 22:30. The index slipped to 45.9 points in October, indicative of contraction in the construction sector. Will we see an improvement in the November reading?
- GDP: Wednesday, 00:30. GDP is one of the most important indicators and an unexpected reading can have a strong impact on the movement of AUD/USD. GDP dropped to 0.5% in Q2, shy of the estimate of 0.6%. The downward trend is expected to continue in Q3, with the estimate standing at 0.2%.
- Trade Balance: Thursday, 00:30. Australia’s trade deficit narrowed to A$1.23 billion in September, much smaller than the forecast of A$1.71 billion. The deficit is expected to drop to A$0.72 billion in October.
- Chinese Trade Balance: Thursday, Tentative. Key Chinese indicators can have a strong impact on the Aussie, as China is Australia’s number one trading partner. The trade surplus jumped to $325 billion in October, but this was shy of the estimate of $366 billion. The surplus is expected to dip to $307 billion in November.
- Home Loans: Friday, 00:30. Home Loans provides a snapshot of the level of activity in the Australian housing sector. The indicator bounced back in September, posting a gain of 1.6%, well above the forecast of -1.5%. The markets are braced for a decline in October, with an estimate of -0.9%.
AUD/USD Technical Analysis
AUD/USD opened the week at 0.7442 and quickly touched a high of 0.7497, as resistance held firm at 0.7513 (discussed last week). The pair then reversed directions and dropped sharply, touching a low of 0.7361. AUD/USD then pushed higher, closing the week at 0.7440.
Live chart of AUD/USD:
Technical lines from top to bottom:
0.7835 has held in resistance since April.
0.7737 was a cap in June 2015.
0.7626 is next.
0.7513 was a cushion in April 2015.
0.7427 marked the low point for the month of September.
0.7333 was a cap in December 2015.
0.7223 has held firm in support since June.
0.7148 is next.
0.7001 is the final support line for now.
I remain bearish on AUD/USD
Monetary divergence continues to favor the US dollar – the RBA is expected to maintain rates at 1.50%, while the Fed is virtually certain to raise rates next week. So, the Aussie will likely remain under pressure with the Fed likely to tighten monetary policy.
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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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