AUD/USD posted a rally late in the week, and the pair closed at 0.9229. It’s a busy week, highlighted by GDP and Retail Sales. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.
The Australian dollar managed to post gains despite a sharp decline in Private Capital Expenditure. In the US, a decline in GDP in Q1 hurt the US dollar, but employment and consumer confidence numbers were solid.Updates:
- Jun 6, 14:35: Non-Farm Payrolls Rose by 217K in May – USD Slides: The recent US Non-Farm Payrolls showed a 217K gain in jobs in May — expectations were around 214K jobs. The...
- Jun 4, 10:27: AUD/USD unable to rise as strong growth is unbalanced: As with the release of capital expenditure (when the Aussie rose on a weak headline number), the reaction to Australian data...
- Jun 3, 17:51: Soft Inflation Warns of Imminent ECB Action: Despite the S&P edging slightly higher to close 1pt above Friday’s high, equities spent the majority of the day gyrating...
- Jun 3, 15:43: Forex Analysis: AUD/USD Pressured to the Downside: June 3, 2014 – AUD/USD (daily chart) has been unable to regain much of its lost ground after having fallen...
- Jun 3, 11:17: The Aussie remains on hold: The overnight session has seen some short covering on the Aussie after the latest interest rate decision. Naturally, there was...
- Jun 3, 9:59: AUD/USD enjoys relief rally after calm RBA message: The Reserve Bank of Australia left the interest rate unchanged at 2.50% as widely expected and hardly made any changes...
- AIG Manufacturing Index: Sunday, 23:30. The week kicks off with this minor event. The index has been on a downward trend, and continues to post readings below the 50-point level, indicative of contraction in the manufacturing sector.
- MI Inflation Gauge: Monday, 00:30. Inflation Gauge is published each month, and assists analysts in tracking CPI, which is released on a quarterly basis. The indicator posted a gain of 0.4% in April, marking a four-month high.
- Building Approvals: Monday, 1:30. This key indicator tends to show sharp fluctuations, making accurate market estimates a tricky task. The indicator posted sharp declines in the past two readings, but the markets are expecting a strong turnaround in the upcoming release, with the estimate standing at 2.1%. Will the indicator follow through with a strong gain?
- Company Operating Profits: Monday, 00:30. This indicator is published each quarter, magnifying the impact of each release. The April reading came in at 1.7%, shy of the estimate of 2.3%. The markets are expecting an improvement in May, with an estimate of 2.6%.
- Commodity Prices: Monday, 6:30. With a global slowdown showing few signs of recovery, Australian commodity prices continue to post sharp declines. The previous release dropped by 12.6%, and little change is expected in the May release.
- Retail Sales: Tuesday, 1:30. Retail Sales is the primary gauge of consumer spending, an important component of economic growth. The April release posted a weak gain of just 0.2%, and little change is expected, with the May estimate standing at 0.3%.
- Current Account: Tuesday, 1:30. Australia continues to post current account deficits, although the good news is that the deficits have decreased in recent readings. In April, the deficit stood at $10.1 billion, matching the forecast. The markets are expecting a sharp drop in the deficit in May, with the estimate standing at $-7.1 billion. If the indicator can meet or beat this forecast, the Australian dollar could benefit.
- RBA Rate Statement: Tuesday, 4:30. The benchmark interest rate is expected to remain at 2.50%, where it has been pegged since August 2013. Although the Australian dollar remains at high levels, the RBA has been reluctant to reduce rates in order to push the currency lower. The markets are not expecting any change to the rate, which will be announced in a statement from the RBA.
- AIG Services Index: Tuesday, 23:30. The index has been above the 50-point level only once in 2014, pointing to contraction in the services sector. No significant change is expected in the May release.
- GDP: Wednesday, 1:30. GDP is the primary gauge of economic activity, and should be treated by traders as a market-mover. The indicator came in at 0.8% in Q4 of 2013, edging above the estimate of 0.7%. The markets are expecting a stronger reading in Q1, with the estimate standing at 0.9%.
- Trade Balance: Thursday, 1:30. This indicator is directly linked to currency demand, as foreigners must purchase Australian dollars in order to pay for exported goods. Australia continues to post trade surpluses, although these have been narrowing in recent releases. The downswing is expected to continue, with a May estimate of $0.53 billion.
- AIG Construction Index: Thursday, 23:30. This minor index continues to post readings below the 50-point level, pointing to contraction in the Australian construction industry.
*All times are GMT.
AUD/USD Technical Analysis
AUD/USD opened the week at 0.9238 and dipped to a low of 0.9210, as support at 0.9180 (discussed last week) remained intact. The pair then climbed sharply, crossing above the 0.93 line and touching a high of 0.9329. The pair closed the week at 0.9306.
Technical lines from top to bottom:
We begin with resistance at 0.9794, which was last tested in June 2013.
There is resistance at the round number of 0.9700, which has held firm since October 2013.
0.9526 provided key resistance in November 2013 and has remained intact since that time.
0.9442 continues to hold firm. The line marked the high point of the pair in November, which saw the Aussie go on a sharp slide and drop below the 0.89 line.
0.9368 remained intact as the pair pushed above the 0.93 line. It could face pressure if the Aussie continues to move upwards.
0.9283 continues to see action, and has reverted to a support role after being breached by the pair. The next line of support is at 0.9175.
The round number of 0.9000 is a key psychological level. It has remained intact since early March. This is followed by support at 0.8893.
The final support level for now is 0.8730. It marks the low point of an Aussie rally which began in early February and saw the currency cross above the 0.94 line.
I am bearish on AUD/USD.
The RBA would like nothing more than for the Aussie to drop below the 0.90 level, and Australian numbers have not been impressive of late. GDP and Retail Sales will have to look sharp or AUD/USD could lose ground. In the US, market sentiment remains positive, and if employment numbers continue to improve, the greenback will likely make gains.
- 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 the Australian dollar (Aussie), check out the AUD to USD forecast.
- USD/CAD (loonie), check out the Canadian dollar.