AUD/USD Forecast February 4-8

AUD/USD was almost unchanged on the week, as the pair  closed just above the 1.04 line, at 1.0405. There are 12 events in the upcoming week.   Here is an outlook of the events and an updated technical analysis for AUD/USD.

There was some impressive Australian data, as New Home Sales and  Business Confidence  were sharp. However this was offset by disappointing Chinese manufacturing data and some weak releases out of the US this past week, including GDP and employment numbers.

Updates: MI Inflation Gauge rose 0.3%. Building Approvals slumped badly, declining 4.4%. The estimate stood at 1.1%. ANZ Job Advertisements declined 0.9%. The RBA maintained interest rates at 3.0%, but hinted that there was room for cuts in the near future. AUD/USD was down on the dovish announcement, and was trading at 1.0382.   Retail Sales looked sluggish, declining by 0.2%. The markets had anticipated a gain of 0.3%. AIG Construction Index dropped for the fist time in four months, coming in at 46.2 points. The index has been stuck below the 40 point level since January 2012. Australia posted some solid employment numbers, as Employment Change rebounded nicely, adding 10.4 thousand new jobs. The estimate stood at 5.8 thousand. The Unemployment Rate improved as well, dropping from 5.5% to 5.4%. However, the NAB Quarterly Business Confidence indicator slumped badly, declining by 5 points. This was its worst showing since mid-2010 and underscores weak business confidence in the Australian economy. AUD/USD is steady, as the pair was trading at 1.0333.

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

1. MI Inflation Gauge: Sunday, 23:30. This consumer inflation indicator is released  monthly, and is  similar  to  CPI, which  is released each quarter.  The index rebounded in January, posting a gain of 0.4%. The markets will be hoping for another release is positive territory.
2. Building Approvals: Monday, 00:30. Building Approvals has been volatile in recent readings, and has failed to meet the estimate in the past two releases. The estimate  for February stands at 1.1%, and the markets will be hoping the indicator can meet or beat expectations.
3. ANZ Job Advertisements: Monday, 00:30. This employment indicator continues to sag, and has not posted a gain since last April. January’s reading was a weak -3.8%, and the markets will be hoping for a turnaround in the upcoming release.
4. AIG Services Index: Monday, 23:30. The index has not cracked the 50 point threshold since last February, indicating ongoing contraction in the services sector. Will the index show any improvement this month?
5. Trade Balance: Tuesday, 00:30. Australia continues to post monthly deficits, with the  export sector hit hard by weak global demand. The February estimate stands at -0.81 billion dollars, which would be an improvement over the previous reading.
6. HPI: Tuesday, 00:30. The housing inflation index posted a modest gain of 0.3% last month, which was well below expectations. The estimate for the upcoming reading is identical.
7. Cash Rate: Tuesday, 3:30. In 2012, the RBA did not hesitate to slash rates, often catching the markets by surprise and sending the Australian dollar for a ride. The current rate stands at 3.0%, and the markets are not expecting any change. The RBA details its rate decision in its Rate Statement, and analysts will be looking for any clues as to future monetary policy.
8. Retail Sales: Wednesday, 00:30. This key consumer indicator disappointed last month, posting a 01.% decline. It was the first drop since September 2012. The markets are expecting a rebound in the upcoming reading, with an estimate of a 0.3% gain.
9. AIG Construction Index: Wednesday, 22:30. The index  was mired in the 30’s range for most of 2012, pointing to severe contraction in the construction industry. The markets will be looking for some improvement in the February release.
10. Employment Change: Thursday, 00:30. Employment Change looked very  weak in January, dropping to a four-month low. The markets are expecting a strong turnaround, with an estimate of 6.1 thousand. The Unemployment Rate is expected to rise slightly, from 5.4% to 5.5%.
11. NAB  Quarterly Business Confidence:  Thursday, 00:30. The indicator has been in negative territory since February, pointing to weak business confidence in the economy. The markets will be hoping for a stronger reading in the upcoming release.
12. RBA Monetary Policy Statement: Friday, 00:30. This statement is released quarterly, and provides the central   bank’s view on economic conditions. Analysts comb through it looking for hints as to future monetary policy, particularly regarding interest rates.

AUD/USD Technical Analysis

AUD/USD opened at 1.0410, and touched a high of 1.0476. The pair then  dropped all the way to 1.0361, before recovering,  to close the week at 1.0405, as it broke through support at 1.0418 (discussed last week).

We start with resistance just below the 1.10 line, at 1.0990. This line has held firm since August 2011. Next is 1.0850, which was last tested in February 2012. This is followed by resistance at 1.0739. Below, there is resistance at 1.0605. The pair has not tested this line since last September. This is followed by 1.0508,which has  strengthened in resistance as the pair trades at lower levels. Next, 1.0418 is providing weak resistance. This line saw activity during the week, and this could continue.

The pair is receiving weak support at 1.0371. This is  followed by  1.0326, which has held firm since mid-November. Below, there is support at 1.0230. We next encounter support at 1.0174, which was last tested in early October.  This is followed by 1.0080, which is protecting the parity level. The parity line, last tested in June, is psychologically significant and provides the next line of support. Next is 0.9917. The final line for now is at 0.9876, which has held firm since  June of 2012.

I am  neutral on AUD/USD.

AUD/USD ended the week very close the 1.04 line, after showing some movement in both directions.  Will  the pair  be able to sustain some momentum?    The upcoming week will   be busy, and the  pair could react to  key releases such as the RBA  rate announcement and key employment data.If US data continues to underwhelm the markets, we could see the Aussie lose some ground.

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

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 USD/CAD (loonie), check out the Canadian dollar forecast