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AUD/USD started off the new year on a positive note,  gaining close to a  cent last week.  The pair closed the week at 0.8944.  There are  three key events this week – Trade Balance, Retail Sales and Building Approvals.  Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

The US bounced posted strong Unemployment Claims and Fed chair Bernard Bernanke stated that the economy continues to recover. This gave risk takers more confidence to move away from the safe-haven greenback and the riskier Aussie showed gains.

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AUD/USD graph with support and resistance lines on it. Click to enlarge:     AUD USD Forecast Jan. 6-10

  1. AIG  Services Index: Sunday, 22:30. The index has not been above the 50-point level since September 2011, indicating ongoing contraction in the services sector. However, we are seeing improvement, and the indicator rose to 48.9 points in November.   Will the index cross above the key 50 line in the upcoming release?
  2. Trade Balance:  Tuesday, 00:30.  This is the first key event of the week. Trade Balance is directly linked to currency demand, as foreigners need to purchase Australian dollars in order to buy the country’s exports. Australia continues to post monthly trade deficits, and the November figure of -0.53 billion dollars was much higher than the estimate of -0.38 billion. The markets are expecting an improvement in December, with the estimate standing at -0.30 billion.
  3. AIG  Construction Index: Tuesday, 22:30. The index continues to climb higher and November’s reading reached an impressive 55.2 points. Will the upward trend continue in December?
  4. Building Approvals: Thursday, 00:30. Building Approvals tends  to show sharp movement, making accurate forecasts a tricky task. After a sparkling 14.4% gain in October, the indicator slumped in November, posting a decline of 1.8%. However, this was well above the estimate of -4.3%.   The markets are   expecting another decline in the upcoming release, with an estimate of -0.9%.
  5. Retail Sales: Thursday, 00:30. Retail Sales is a market-mover, so analysts will be carefully monitoring this key consumer spending event. The indicator posted a gain of 0.5% in December, edging above the estimate of 0.4%. The estimate for December stands at 0.5%.
  6. Chinese CPI: Thursday, 1:30. The Australian dollar is sensitive to key Chinese events such as CPI, as China is Australia’s number one trading partner. Chinese CPI has not been below the 3% level since September, but the markets are expecting a weaker figure in December, with the estimate standing at 2.7%.
  7. HIA New Home Sales: Friday, Tentative. This indicator  tends to show  strong fluctuations, and posted a decline of 3.8% in November after two straight gains. The markets will be hoping for a turnaround in the December release.
  8. Chinese Trade Balance: Friday, Tentative. Chinese Trade Balance has  looked strong, and the November  reading came in at 33.8 billion dollars, crushing the estimate of 2.13 billion. The forecast for the December release  is expected to show a slight drop, with an   estimate of 32.6 billion.

*All times are GMT

 

AUD/USD Technical Analysis

AUD/USD started the week at 0.8853 and  quickly dropped to a low of 0.8833. The pair then reversed directions and briefly pushed above the key 0.90 level (discussed last week), touching a high of 0.9005. The pair then retracted, closing at 0.8944.

Live chart of AUD/USD: [do action=”tradingviews” pair=”AUDUSD” interval=”60″/]

 

Technical lines from top to bottom:

We  begin with resistance at 0.9441. This line  marks the start of a  downward spiral in November which saw the  Australian dollar  drop close to  the key 0.90 level.

0.9283 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  gave way as  AUD/USD  moved higher late in the week.

0.8893 was breached for the  third consecutive  week and has reverted to a  support role. It is  not a strong  line and could face pressure if the Aussie loses ground.

0.8728 was last breached in July 2010, when the Australian dollar began an extended rally that saw it climb close to the 1.10 line. This is followed by 0.8578.

0.8432  is the final support line for now. This line played a key support role in late 2009.

 

I am bearish on AUD/USD.

The Australian dollar  had a good week, but is trading below the 0.90 line and remains vulnerable to further losses. The RBA is none to keen for the Aussie to improve and will likely try to  “talk down” the currency.  With QE taper a reality, we can expect further taper moves by the Fed in the near future, which will likely give a boost to the US dollar.