AUD/USD Forecast May 6-10

The Australian dollar  showed some movement, but was almost unchanged at the end of the week. AUD closed at 1.0315.  This week’s highlights  include the Cash Rate and Employment Change.  Here is an outlook of the events and an updated technical analysis for AUD/USD.

Australian Building  Approvals posted a sharp drop, which weighed on the Australian dollar.  However, strong US employment numbers  led to investors feeling more confident in purchasing riskier assets such as the  Aussie.

Updates: MI Inflation Gauge edged up to 0.3%. Retail Sales disappointed, declining by 0.4%. The estimate stood at 0.2%. ANZ Job Advertisements continued to decline, posting a reading of -1.3%. AIG Construction Index fell to 35.2 points. Trade Balance posted a surplus of $0.31 billion, the first time surplus since August 2012. The estimate stood at $0.20 billion. HPI posted a weak gain of 0.1%. This was well off the forecast of a 1.9% gain. The RBA caught the markets by surprise, cutting rates from 3.00% to 2.75%. The markets had expected no change. AUD/USD dropped on the news, and was trading at 1.0204. Chinese Trade Balance bounced   back from a rare deficit last month, posting a surplus of $18.2 billion. This easily beat the estimate of $15.5 billion. Chinese CPI rose from 21.% to 2.4%, edging out the estimate of 2.3%. Australia’s Employment  Change improved sharply, from -36.1 thousand to 50.1 thousand. This blew away the estimate of 11.5 thousand. The Unemployment Rate dipped from 5.6% to 5.5%. This edged below the forecast of 5.6%. The RBA will issue a Monetary Policy Statement on Friday. Technical: Forex Analysis: AUD/USD Hits and Bounces off Range Bottom.  It should be an interesting read after the surprise rate cut earlier this week. The Aussie pushed above the 1.02 after the strong employment release. AUD/USD was trading at 1.0232. Friday: following the dollar’s storm across the board and the move of USD/JPY above 100, AUD/USD is falling towards parity, and is trading at the lowest levels since June 2012.

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

1. MI Inflation Gauge: Monday, 00:30. This indicator allows analysts to measure inflation on a monthly basis, as CPI is only released every quarter. The indicator posted a modest 0.2% gain in April.
2. Retail Sales: Tuesday, 1:30. Retail Sales jumped 1.3% in the April reading. The markets are expecting a much lower gain this time around, with an estimate of 0.2%.
3. ANZ Job Advertisements: Monday, 1:30. This employment indicator has been posting declines since 2012, with just one exception. This indicates weakness in the employment sector. The markets will be hoping for some improvement in the upcoming release.
4. AIG Construction Index: Monday, 23:30. The index has been well below the 50 level, indicating persistent weakness in the construction sector. No significant change is expected in the May release.
5. Trade Balance: Tuesday, 1.30. Trade Balance posted a small deficit last month, and the markets are expecting a surplus of $0.20 billion in May. If the indicator does post a surplus, it would be for the first time since August.
6. HPI: Tuesday, 1:30. This index is an leading indicator of activity in the housing market. The index posted a respectable gain of 1.6% last month, and the markets are expecting another strong reading of 1.9% this time around.
7. Cash Rate: Tuesday, 4:30. The Cash Rate has been at 3.00% since November, but the RBA has caught the markets off guard before, so a rate cut is certainly a possibility. However, most analysts are expecting the interest rate levels to remain unchanged. The RBA will announce its decision in a Rate Statement.
8. Chinese Trade  Balance:  Tentative, Wednesday. Chinese Trade Balance posted a rare deficit in April. The markets are expecting   a turnaround, with an estimate of a $15.5 billion surplus.
9. Employment Change: Thursday, 1:30. This key indicator looked awful last month, posting a loss of 36.1 thousand jobs. The markets are forecasting much better news in May, with an estimate of 11.5 thousand.
10. Chinese CPI: Thursday, 1:30. Chinese CPI posted a gain of 2.1% last month. The markets are expecting a gain of 2.3% in the upcoming release. Traders should  treat this event as a market-mover for  AUD/USD.
11. RBA Monetary Policy Statement: Friday, 1:30. This release follows the RBA interest rate announcement. The policy statement discusses the RBA’s view of economic conditions and inflation, and analysts will comb through it, looking for hints about future monetary policy.

AUD/USD Technical Analysis

AUD/USD opened at 1.0283, and  climbed to a high of 1.0341.  The pair then  fell sharply,  dropping to a low of 1.0222.  AUD recovered, and closed at 1.0315, as the resistance line of 1.0326 (discussed last week) held firm.

Technical lines from top to bottom:      

We  begin with resistance at 1.0739. This line has remained intact since March 2012, when the Australian dollar started a steep drop which saw it fall well below parity. The is followed by 1.0605. The pair has not tested this line since September. Below, there is resistance at 1.0508. Next, 1.0416 was serving in a support role through much of April, but is now providing strong resistance, as the pair trades at lower levels. This is followed by resistance at 1.0326, which  was briefly breached as the pair pushed higher before retracting. It is a weak line, and could see further action early next week.

AUD/USD  continues to  receive support at 1.0260. The pair broke through this line as the Aussie lost ground, but it remained intact at the end of the week.  Below, the pair is receiving support at 1.0174. This line has held steady since early March. We next encounter support at the line of 1.0080, which is protecting the parity level. This is followed by support at the parity line, which has held steady since June and is a psychologically significant barrier. Next, there  is support at 0.9907.  The final support level is at 0.9795, which has held firm since June 2012.

I  continue to be  bearish on AUD/USD.

Australian numbers have not been strong, and the RBA has left the door open for more interest rate cuts, which would hurt the Aussie. US releases showed improvement last week, but it remains to be seen if the recent streak of poor numbers is over.

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.