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AUD/USD  enjoyed an excellent week, gaining over 200 points. The pair  tested the key 0.900 line and closed the week at 0.8957. This week’s highlights are NAB Business Confidence and Employment Change. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.


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AUD/USD graph with support and resistance lines on it. Click to enlarge:   AUDUSD Forecast Feb. 10-14

  1. NAB Business Confidence: Tuesday, 00:30. The indicator has been steady in recent readings, posting 6 points in the previous release. The markets will be hoping for another strong release for January.
  2. House Price Index:  Tuesday, 00:30. HPI  helps  analysts gauge the level of activity  in the housing sector. The index posted a respectable gain of 1.9% last month, but this fell short of the estimate of 2.3%. The markets are expecting more positive news for January, with an estimate of 3.2%.
  3. Home Loans:  Tuesday, 00:30. An increase in home loans points to stronger activity in the housing industry as well as increased consumer confidence and spending. The indicator gained 1.1% last month, matching the forecast. The estimate for the January loan is 0.9%.
  4. Chinese Trade Balance: Tuesday, Tentative. Chinese key indicators such as Trade Balance can affect the direction of AUD/USD since China is Australia’s number one trading partner. Trade Balance dropped to $25.6 billion in December, down sharply from $33.8 billion a month earlier. The markets are anticipating that the downward trend will continue, with an estimate of $24.2 billion.
  5. Westpac Consumer Sentiment: Tuesday, 23:30. Consumer confidence has been sluggish, as the indicator has posted three declines in the past four releases. Another reading below zero could push down on the Aussie.
  6. MI Inflation Expectations: Thursday, 00:00. This indicator looks at consumer expectations with regard to inflation. The indicator has been climbing, and hit 2.3% last month.
  7. Employment Change: Thursday, 00:30. This is the highlight of the week. The indicator has been marked by sharp fluctuations, leading to estimates that are well off the mark. The December reading was awful, with a decline of 22.6 thousand. The markets had expected a gain of 10.3 thousand. A strong turnaround is expected in the January release, with the estimate standing at 15.3 thousand. The Unemployment Rate is expected to nudge higher to 5.9%, up from the present 5.8%.
  8. RBA Assistant Governor Debelle Speaks: Thursday, 1:25. Debelle will address a financial symposium in Sydney. Analysts will be listening carefully for any hints as to the RBA’s future monetary policy.
  9. RBA Assistant Governor Christopher  Kent Speaks: Thursday, 10:05. Kent is scheduled to speak at an event in Sydney. A speech which is more hawkish than expected is bullish for the Australian dollar.
  10. Chinese CPI: Friday, 1:30. Chinese CPI has been losing ground since October, pointing to slower activity in the Chinese economy. The key inflation index posted a gain of 2.5% in the previous reading and little change is expected, with a forecast of 2.4%.

*All times are GMT.

AUD/USD Technical Analysis

AUD/USD started the week at 0.8754 and  quickly dropped to  a  low of 0.8730. The pair then  climbed higher all week, touching a high of 0.8998, just shy of the key 0.9000 line (discussed last week).  The pair closed the week  at 0.8957.


Technical lines from top to bottom:

With AUD/USD posting strong gains, we begin at higher levels:

There  is resistance at  0.9442. This 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. This is followed by resistance at  0.9368, which was an important line in mid-November.

Next, there is resistance at 0.9283. This line  saw a lot of action in the months of June and July, alternating between resistance and support roles. It has provided steady resistance since November.

0.9180  follows.  It is followed by the round number of 0.9000, which saw activity earlier in January and held firm this week as the Australian dollar posted sharp gains.

0.8893 has switched to a support level after providing resistance since mid-January.

0.8728 held steady early in the week as the pair dipped lower. It has some breathing room as the Australian dollar trades above the 0.89 line.

This is followed by 0.8578, which has remained intact since  July 2010.

The final  support level for now is  0.8432, which  played a key support role in late 2009.

I am  neutral on AUD/USD.

The Aussie looked golden last week, jumping over 200 points against the US dollar. Ironically, the Australian dollar gained ground after the RBA expressed its satisfaction that the currency was trading at lower levels. Will the RBA again try to “talk down” the Australian dollar? In the US, the Fed taper train is chugging along, and if next week’s releases look strong, we   could well see another taper in February, which would be bullish for the greenback.