AUD/USD showed little change this past week. The pair dipped below 1.05 on Friday, before recovering to close at 1.0509. There are just four releases this week, with CPI the highlight.
The US released a host of key data, but it was a mixed bag. Housing and Employment data was very sharp, but manufacturing numbers and consumer sentiment were weak, making it difficult to assess the extent of the US recovery. In Australia, employment numbers were sluggish, but Chinese GDP looked good. All in all, the numbers were a mix, and AUD/USD didn’t move very far by week’s end.
Updates: MI Leading Index will be released later on Tuesday. The composite index gainedd just 0.1% in December, its worst performance since January 2012. The Aussie is pushing higher, as AUD/USD was trading at 1.0568. MI Leading Index jumped 0.6%. This was a strong improvement over the previous reading of just 0.1%. CPI dropped sharply to 0.2%, and failed to meet the estimate of 0.4%. Trimmed Mean CPI posted a 0.6%, a notch below the estimate of 0.7%. Chinese Flash Manufacturing looked sharp, rising to 51.9 points. The Australian dollar has edged downwards, and is testing the 1.05 line. AUD/USD was trading at 1.0507.
AUD/USD graph with support and resistance lines on it. Click to enlarge:
- MI Leading Index: Tuesday, 23:30. This index is composed of 9 leading indicators, but is a third-tier indicator since most of the indicators in the index has been released previously. The index slipped badly last month, managing to post a gain of just 0.1%. The markets will be hoping for a rebound in the January reading.
- CPI: Wednesday, 00:30. CPI measures consumer inflation, and is one of the most important economic indicators. The index is released every quarter. An unexpected reading can have a major impact on the direction of AUD/USD. CPI jumped 1.4% in Q3 of 2012, its highest figure since early 2011. The markets are expecting a downward shift in the upcoming release, with an estimate of a 0.4% gain.
- Trimmed Mean CPI: Wednesday, 00:30. Trimmed Mean CPI also measures consumer inflation, but excludes the most volatile 30% of items. The index rose 0.7% in the previous release, and the markets are expecting an identical reading for Q4.
- Chinese Flash Manufacturing PMI: Thursday, 1:45. The Chinese manufacturing industry has suffered a prolonged period of contraction. However, Manufacturing PMI has pushed above the 50 threshold for the past two readings, indicating recent expansion in this sector. Will this positive trend continue? An unexpected reading can affect the movement of AUD/USD, as China is Australia’s number one trading partner.
AUD/USD Technical Analysis
AUD/USD opened at 1.0536, and touched a high of 1.0580. The pair then dropped below the 1.05 line, falling to 1.0485. AUD/USD recovered slightly, closing at .10509, just above the support line of 1.0508 (discussed last week).
We start with resistance at 1.1066, a line that has not been tested since August 2011. This is followed by 1.0990. Next is 1.0850, which has held firm since February. This is followed by resistance at 1.0739. This strong line has not been tested since early March. Below, there is resistance at 1.0605. This line held firm as the Aussie pushed close to the 1.06 line before retracting.
AUD/USD continues to receive support at 1.0508. This is a weak line which the pair broke through late in the week. It could see more activity early next week. Next, there is support at 1.0418. 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 the next line of support. The final support level for now is at 0.9917.
I am neutral on AUD/USD.
The Australian dollar has enjoyed a solid January, and has spent most of the month above the 1.05 line. However, the strong performance has tapered off recently, and weak employment numbers disappointed the market. Further weak data could hurt the Aussie. At the same time, positive Chinese data has been good news for Australia, and further solid releases from the Asian giant could give the Australian dollar some upwards momentum. Much will depend on the news out of the US – if the debt ceiling issue worsens or the economic recovery stalls, we could see a flight of capital away from riskier currencies like the Aussie, towards the safe-haven US dollar.
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
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