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AUD/USD  continues to tumble, and lost close to 100 points last week. The pair closed the week below the 0.87 line.  This week’s  highlights are  NAB Business Confidence and PPI.  Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

In the US,  Unemployment Claims  enjoyed  another good week, beating the estimate. Australian Consumer Sentiment posted another decline, pointing to weak consumer confidence.

 

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AUD/USD graph with support and resistance lines on it. Click to enlarge:   AUD USD Forecast Jan. 27-31

  1. CB Leading Index: Monday, 23:00. This indicator is based on 7 economic indicators. The index improved to 0.5% last month, its highest gain in almost three months. The markets are hoping that the upward trend continues.
  2. NAB Business Confidence: Tuesday, 00:30. This is the major event of the week. The indicator has posted two straight readings of 5 points, well below the 12 points recorded in September. Will the indicator climb higher in the December reading?
  3. MI Leading Index:  Tuesday, 23:30.  The index is comprised of 9 economic indicators, but is a minor event since most of the data was released previously. The index has struggled lately, with two declines in the past three releases.
  4. HIA New Home Sales: Thursday, Tentative. This indicator is an important one, since a new home is likely the biggest purchase that a consumer  will make. The indicator  has been fluctuating, and  posted an excellent gain in December of 7.5%, rebounding form a decline a month  earlier.
  5. Import Prices: Thursday, 00:30. Import Prices is carefully monitored since it is linked to inflation. The indicator posted an excellent gain of 6.1%, crushing the estimate of 3.5%. The markets are expecting a much weaker gain in December, with the estimate standing at 2.1%.
  6. PPI: Friday, 00:30. The Producers Price Index is a key inflation indicator and can affect  the movement of AUD/USD. The index surprised the markets with a 1.3% gain last month, well above the estimate of 0.4%. The estimate for the upcoming release stands at 0.7%.
  7. Private Sector Credit: Friday, 00:30. This indicator is an important gauge of consumer and business borrowing and spending. The indicator has been very steady, posting four straight gains of 0.3%. Little change is expected in the December reading.
  8. Chinese Manufacturing PMI: Saturday, 1:00. The PMI continues to post readings above the 50 line, indicating modest expansion in the Chinese manufacturing sector. Key Chinese releases such as PMIs can affect the movement of AUD/USD.

*All times are GMT.

AUD/USD Technical Analysis

AUD/USD started the week at 0.8773 and  touched a high of 0.8888, as resistance at 0.8893 (discussed last week) held firm. It was all downhill from there, as the pair  slipped below the 0.87 line,  touching a low of 0.8660.  The pair closed the week  at 0.8679.

 

Technical lines from top to bottom:

We start with 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  is the next line of resistance.  It is followed by the round number of 0.9000, which saw activity earlier in January.

0.8893  held firm as the Aussie posted gains mid-week and crashed through this support level. It  continues to provide  strong resistance.

0.8728 was  breached by the pair for the first time since  July 2010, when the Australian dollar began an extended rally that saw it climb close to the 1.10 line.  It starts the week in the unusual role of providing resistance.

This is followed by 0.8578, which has remained intact since  July 2010. Will the pair continues its downward move towards this support level?

Next is 0.8432, which  played a key support role in late 2009. Below is  0.8365, which  was an important resistance line in July 2009.

The final support line for now is 0.8154, which was last breached in June 2010.

I am bearish on AUD/USD.

The  slumping Aussie  fell below the 0.87 level for the first time in over three years.  With QE a reality in the US and another taper a strong possibility next week, the Aussie remains under strong pressure from the US dollar. The  Australian dollar  continues to be weighed down by the RBA, which has made no secret that it wants the Australian dollar trading at lower levels.