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The Australian dollar  showed some movement in both directions, but ended the week with little net change, closing at  0.9260.  This week’s highlights are Building Approvals and PPI. Here is an outlook of the events and an updated technical analysis for AUD/USD.

AUD/USD lost some ground in mid-week as Australian CPI missed the estimate and Chinese Manufacturing PMI was way off the forecast. The pair then  recovered, taking advantage of disappointing employment and manufacturing data out of the US late in the week.

[do action=”autoupdate” tag=”AUDUSDUpdate”/]

AUD/USD graph with support and resistance lines on it. Click to enlarge:   AUD USD Forecast July 29-Aug2nd

  1. Building Approvals:  Tuesday, 1:30.  This  key  construction indicator  has been all over the map, making accurate predictions difficult. The previous release posted a decline after an excellent gain in the prior release. The markets are expecting a solid gain of 2.2% in the upcoming release.
  2. RBA Governor Glenn Stevens Speaks:  Tuesday, 3:05. Stevens will address a business luncheon in Sydney. Analysts will be listening closely for any hints as to future monetary policy. A speech which is more hawkish than expected is bullish for the Australian dollar.
  3. Private Sector Credit: Wednesday, 1:30. This indicator is an important gauge of consumer confidence and spending, as increase in consumer confidence  leads to  more loans to make purchases. The indicator has been   very steady, recording readings of 0.2% or 0.3% throughout the course of the year. The estimate for the July reading is expected to remain at 0.3%.
  4. AIG Manufacturing Index: Wednesday, 11:30. After hitting a low of 36.7 points in April, the index has bounced higher, and came in just shy of the 50 level in June, at 49.6 points. The 50-point level separates between contraction and expansion. Will the index push across the 50 line in the upcoming release?
  5. Chinese Manufacturing PMI: Thursday, 1:00. The Aussie is sensitive to key Chinese releases, as the Asian giant is Australia’s number one trading partner. The index has managed to remain slightly over the 50-point level throughout the year. In the previous release, the index dropped slightly, to 50.1 points. The markets are bracing for a drop to 49.8 points. If this occurs, we could see the Australian dollar lose ground. Will the PMI manage to stay above the 50 level?
  6. HIA New Home Sales: Thursday, tentative. This housing indicator has posted gains every month in 2013 except one. An increase in the sale of new homes is good news for the Australian housing industry and also points to increasing consumer borrowing and spending.  The previous release came in at 1.6%, and the markets will be hoping for another gain in the August release.
  7. Import Prices: Thursday, 1:30. This quarterly indicator has not looked particularly impressive, a reflection of ongoing weakness in Australia’s export sector. The indicator dropped to a flat 0.0% in Q1, but beat the estimate of -0.5%. The markets are expecting a strong rebound for Q2, with a estimate of 1.9%. Will the indicator match or beat this optimistic prediction?
  8. Commodity Prices: Thursday, 6:30. Australian commodity prices continues to post declines, and news of a slowdown in China will only make things worse. The July reading showed a decline of 10.5%, the sharpest drop recorded in 2013. The markets are expecting another poor performance in the August release.
  9. PPI: Friday, 1:30. This key inflation indicator is released each quarter, magnifying its impact. PPI has posted modest gains in the past two quarters, with a gain of 0.3% in Q1. The estimate for Q2 stands at 0.5%.

AUD/USD Technical Analysis

AUD/USD  started the week at 0.9220, and reached a high of 0.9318, as it broke through resistance at 0.9283 (discussed last week). The pair then dropped sharply, touching a low of 0.9128. However, AUD/USD recovered these gains plus a bit more, and closed the week at 0.9260.

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

Technical lines from top to bottom:      

We  begin with strong resistance at 0.9748, which acted as a cap in early June.

0.9634 saw action in mid-June,  when the pair started a downward slide in which it dropped below the 0.92 line.

0.9549 is the next line of resistance.  This is followed by 0.9428. This line had  played a support  role  since late 2011, but was breached in June, and has provided strong resistance since then.

0.9283 has seen a lot of action in the month of July, alternating between resistance and support. It is providing weak resistance, and could be tested early in the week.

AUD/USD  continues to receive support at 0.9180. This line was breached as the pair dropped in mid-week, but remained intact at the end of the trading week.

0.9041  was providing weak support in the first half of July, but gained some breathing room as AUD/USD traded at higher levels.

The round number of 90 is next.    This psychologically important  level  has provided support since September 2010, but did have a scare as the pair dipped below this line in early July.

0.8893 was last  breached in August 2010, as the Australian dollar put together a strong  rally which saw it  climb  above the 1.10 line.

0.8747  is the final support line for now.  This line has remained in place since July 2010.

I  am bearish on AUD/USD.

The US economy continues to look stronger than that of Australia, and the Aussie could slide if key Australian numbers do not meet expectations. Traders should be on alert for any hints about QE tapering from the Federal Reserve, which could bolster the US dollar.

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

Further reading: