AUD/USD Forecast January 7-11

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AUD/USD started the first trading week of the year with some strong movement and rose close to one cent, closing at 1.0475. Highlights of the upcoming week include Trade Balance, Retail Sales and Building Approvals. Here is an updated technical analysis for AUD/USD.

Last week’s highlight was the fiscal cliff agreement which was reached in the US Congress. The Australian dollar took advantage of the US dollar’s broad weakness following the agreement, and managed to retain most of the gains it picked up during the week.

Updates: AIG Construction Index improved to 38.8 points. However, the construction sector remains in a deep-freeze, as the index has not cracked the 40 point level since January. Australia posted a larger deficit in December, reaching 2.64 billion dollars. The estimate stood at -2.21B. AUD/USD continues to test the 1.05 line, as the pair was trading at 1.0500. Australian Retail Sales declined by 01%. This failed to meet the market estimate of a 0.3% gain. Australian Building Permits disappointed, coming in at 2.9%. This was well below the estimate 4.0%. The weak numbers were overshadowed by outstanding Chinese Surplus numbers, as the surplus jumped to 31.6 billion dollars. This crushed the estimate of 20.1B. The aussie shot up on the news, as AUD/USD was trading at 1.0580.

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

  1. AIG Construction Index: Monday, 22:30. This construction index continues to look very weak, although it has improved slightly in the past few months. The markets are not expecting much change from December’s reading of to 37.0 points.
  2. Trade Balance: Tuesday, 00:30. Australia posted a monthly trade balance deficit for most of the latter half of 2012. The deficit is expected to widen in the January release, with an estimate of -2.21 billion dollars.
  3. HIA New Home Sales: Wednesday, Tentative. The housing sector has been a soft spot in the economy, but this indicator looked sharp last month, jumping 3.4%. This gain halted a string of three consecutive declines. The markets will be hoping for another strong reading in January.
  4. Retail Sales: Wednesday, 00:30. Retail Sales disappointed in December, posting a flat 0.0%, which was well below the estimate. The markets are expecting a rebound this month, will a forecast of a 0.3% gain.
  5. Building Approvals: Thursday, 00:30. This indicator is often marked by sharp swings, and last month was no exception. After a stellar gain of 7.8% in the late October release, Building Approvals slumped by 7.6% in December. The estimate for the upcoming release stands at 3.1%. Will the indicator bounce back with a strong reading this month?

AUD/USD Technical Analysis

AUD/USD opened at 1.0390, and then dropped to 1.0382. The pair then roared back, touching a high of 1.0527. The pair closed at 1.0475, as the resistance line of 1.0508 (discussed last week) remained intact.

We start slightly higher this week, with resistance at 1.0990. Next is 1.0874, which has held firm since August 2011. This is followed by resistance at 1.0718. This strong line has not been tested since early March. Below, there is resistance at 1.0605. Next is 1.0508, which was briefly broken this week as the pair climbed sharply. This line remains intact, but is providing weak resistance. 

AUD/USD is receiving support at 1.0424, which served in a resistance role last week. Next is 1.0326, which has held firm since mid-November. This line has strengthened following the strong upward move by the pair this week. 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. We next encounter support at 0.9917. The final support level for now is 0.9815, a strong line which has not been tested since June.

I am bearish on AUD/USD.

The fiscal cliff was indeed a dollar negative event, but the greenback quickly rebounded and made sharp gains against currencies such as the yen and euro. The aussie managed to avoid this last week, but the US dollar could make up some lost ground. As well, US employment numbers on Friday were not strong, and unease about the US economy could send investors to the safety of the US dollar, at the expense of the riskier Australian dollar.

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

Further reading:

Get the 5 most predictable currency pairs

About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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