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AUD/USD  showed some strength during the week but gave up those gains on Friday. The pair  closed the week  almost unchanged at 0.8077. This week’s highlights include Retail Sales and Building Approvals.  Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

In the US, key data was on the weak side, as Unemployment claims climbed higher  and the ISM Manufacturing PMI softened. Australia only had one minor event last week, and key Chinese data met expectations.

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

AUDUSDForecast Jan.5-9

  1. AIG Manufacturing Index: Sunday, 22:30. The index managed to crawl above the 50 line in November, with a reading of 50.1 points. This broke a string of readings below 50, pointing to contraction in the manufacturing sector. The markets will be hoping for another reading above the 50 level n December.
  2. Trade Balance: Tuesday, 00:30. Trade Balance is a key event, as trade figures are closely linked to currency demand. The trade deficit narrowed in October, dropping to AUD -1.32 billion. This beat the estimate of AUD -1.85 billion. The estimate for the upcoming reading stands at AUD -1.59 billion.
  3. AIG Services Index: Tuesday, 22:30. The index had an awful 2014, with just one release above the 50-point line, which separates expansion from contraction. The November reading came in at 43.8 points, and little changed is expected in the December release.
  4. Building Approvals: Thursday, 00:30. Building Approvals tends to show strong fluctuation, leading to readings that are often well off the estimates. In October, the indicator registered an excellent gain of 11.4%, crushing the estimate of 5.2%. The markets are bracing for a sharp downturn, with a forecast of -2.7%.
  5. AIG  Construction Index: Thursday, 22:30. The index slipped badly in November, posting a reading of 45.4 points. This broke a string of releases above the 50-point level. The markets are hoping that the index can return to expansion mode in the upcoming release.
  6. Retail Sales: Friday, 00:30. Retail Sales is one of the most important economic indicators and can have a major impact on the movement of AUD/USD. The indicator softened in November, posting a weak gain of 0.4%. However, this was enough to beat the estimate of 0.1%. The estimate for the December reading stands at 0.3%.
  7. Chinese CPI: Friday, 1:30. The Aussie is sensitive to key Chinese data, as the Asian giant is Australia’s number one trading partner. CPI continues to lose ground, and the  December reading of 1.4% was the lowest in 5 years. Weaker inflation means slower activity in the Chinese economy, which does not bode well for the Australian dollar.
  8. Chinese Trade Balance: Saturday, Tentative.  The trade surplus was unexpectedly strong last in November, jumping to $54.5 billion. This easily beat the estimate of $44.3 billion. The markets are expecting another solid release, with an estimate of $48.9 billion for December.

* All times are GMT.

AUD/USD Technical Analysis

AUD/USD  started the week  at 0.8113  and  touched a  high of 0.8215, as the pair tested  resistance at 0.8150 (discussed last week).  The pair then dropped  below  the 0.81 line, dipping to a low of 0.8077,  This also marked the close for the week.

Live chart of AUD/USD:

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Technical  lines from top to bottom:

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 and remains a strong line as the pair trades close to the 0.81 line.

0.8316 is the next line of resistance. It has held firm since mid-December.

0.8150 continues to see action. This line was tested  for a second straight week as  the pair  posted sharp gains before retracting late in the week. It is currently an immediate  line and could face pressure early in the  week.

0.8013  is providing support. This line is the last barrier in front of the psychologically critical 0.80 level.

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  am  bearish  on AUD/USD.

The Aussie has plunged in the past two months, as the currency has surrendered over 600 points since the start of November. Still, the RBA wants to see a lower Aussie to help kick-start growth. With the Federal Reserve expected to raise rates in the first half of 2015, the critical 0.80 line could  come under  pressure this week.

In this week’s podcast, we offer a preview for 2015:  the Fed hike, EZ QE, slippery oil, UK politics, Big in Japan, AUD down under, Loonie blues and Gold