AUD/USD Forecast June 30-July4

AUD/USD  showed little  change for a second straight week, as the pair closed  at 0.9421. The upcoming week is a busy one, highlighted by Building Approvals and Retail Sales. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

US GDP for Q1 shocked the markets with a decline of 2.9%  and this resulted in broad pressure on the greenback. There were no Australian economic releases last week, which contributed to the lack of activity from AUD/USD.

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

1. MI Inflation Gauge: Monday, 12:30.  This indicator is published each month and helps analysts track CPI, which is only released each quarter. The indicator continues to post small gains, and came in at 0.3% last month.
2. HIA New Home Sales: Monday, Tentative. This data is an important gauge of activity in the housing sector. and helps gauge consumer confidence and spending, as a new home is likely that most expensive purchase a consumer will make. The indicator rebounded with  a strong gain of 2.9% in the previous reading.
3. Private Sector Credit: Monday, 1:30. Analysts follow the changes in credit  taken out by  the private sector since it is a good gauge of confidence in the private sector. The indicator has been quite steady, and edged to 0.5% last month, just above the estimate of 0.4%.
4. AIG Manufacturing Index:  Monday, 23:30. The index continues to point to contraction in the manufacturing sector. The indicators readings have been below the 50-point level, which separates contraction and expansion, since last August. However, the index showed strong improvement last month, rising to 49.2 points.
5. Cash Rate: Tuesday, 4:30. The RBA has pegged the benchmark interest rate of 2.50% since last August. This is expected to continue in July, as the central bank continues to try and boost the economy with low interest rates. The RBA will announce the new rate  through a rate statement.
6. Commodity Prices: Tuesday, 6:30. Commodity Prices have been characterized by sharp drops in 2014, and the May decline of 12.8% is the highest we have seen this year. With the global slowdown continuing to hurt commodity prices, we can expect another decline in the upcoming release.
7. Trade Balance: Wednesday, 1:30. Trade Balance is closely linked to currency demand, as foreigners must purchase  Australian  dollars in order to by Australian exports.  In May, the  indicator posted its first decline of the year, slipping to -0.12 billion dollars, well off the estimate of 0.40 billion. Another decline is expected in the June reading, with an estimate of -0.21 billion.
8. RBA Assistant Governor Guy Debelle: Wednesday, 11:05. Debelle will speak at   a conference in London. The markets will be looking for any hints as to the RBA’s future monetary policy.
9. AIG Services Index: Wednesday, 23:30. The index has cracked the 50-point barrier only once this year, pointing to ongoing contraction in the services sector. The index improved to 49.9 points last month. Will the index push higher and move above the 50 level?
10. RBA  Governor Glenn Stevens:  Thursday, 1:00. The markets are always interested in what Stevens’ has to say, and we have seen AUD/USD react to his statements in the past. Stevens will address a conference in Hobart.
11. Building Approvals: Thursday, 1:30. Building Approvals is characterized by sharp fluctuations, leading to market estimates which often are well off the mark. The indicator has posted three straight declines, with the May release coming in at -5.6%, well below the estimate of +2.1%. The markets are expecting a strong turnaround in the upcoming release, with an estimate of 3.5%. Will the indicator follow suit with a strong gain?
12. Retail Sales:  Thursday, 1:30. Retail Sales is the primary gauge of consumer spending, and an unexpected reading can quickly affect the movement of AUD/USD. The indicator has been posting small gains of late, with the May release coming in at 0.2%. This was shy of the estimate of 0.3%. The June estimate stands at 0.3%.
13. RBA Assistant Governor Malcolm Edey Speaks: Thursday, 3:40. Edey is the third RBA policymaker to deliver public remarks this week. A speech which is more hawkish than expected could give a boost to the Aussie.

*All times are GMT.

AUD/USD Technical Analysis

AUD/USD  opened the week at 0.9384 and quickly hit a high of 0.9445, breaking above resistance at 0.9442 (discussed last week). The pair then reversed directions,  dropping to a low of 0.9354. The pair recovered and closed the week at 0.9421.

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

Technical lines from top to bottom:

We  begin  with resistance at 0.9910, which has remained firm since last May.

0.9758 marked the start of a rally by the US dollar, which saw the pair drop as low as 0.8650.

This is followed by 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  was briefly breached but recovered and is a weak resistance line. This 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  was also breached as the pair  lost ground  before recovering. It  remains in a  support role and could face pressure early in the week.

0.9283 has some breathing room and is providing strong support. 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.

The  final support line for now  is  0.8893.  AUD/USD broke above this line in February, and has posted strong gains since then.

I am  neutral on AUD/USD.

The US  dollar managed to hold  against the Aussie despite the weak GDP numbers. The RBA will likely hold rates, and we could see the Aussie continue to trade close to the 0.94 level.

• 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.