AUD/USD Forecast Nov. 2-6

AUD/USD posted losses for a third straight week, losing close to 100 points. The pair closed at 0.7133. It’s a very busy week with 15 events on the calendar. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

The Aussie took a hit as Australian CPI dipped to 0.5% in Q3, shy of the estimate of 0.7%. As well, a surprisingly hawkish Fed statement send the US dollar higher. In the US, workers wages were up in Q3, as the Employment Cost Index posted a gain of 0.6%. UoM Consumer Sentiment improved to 90 points, which was within expectations.

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

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

Chinese Manufacturing PMI: Sunday, 1:00. The Australian dollar is sensitive to key Chinese releases such as PMIs, as China is Australia’s number one trading partner. The index has hovered close to the 50-point, which separates contraction from expansion, throughout 2o15. The October reading remained unchanged at 49.8 points, within expectations.
AIG Manufacturing Index: Sunday, 22:30. This index has been improving in recent releases, and climbed to 52.1 points in September.
MI Inflation Gauge: Sunday, 23:30. This indicator, which is released each month, helps analysts track official CPI, which is released on a quarterly basis. In September, the indicator improved to 0l3%, marking a 4-month high.
Building Approvals: Monday,00:30. Building Approvals is characterized by strong fluctuations, often resulting in readings which are well-off the estimates. This was the case in August, with the reading of -6.9% much weaker than the estimate of -1.8%. The markets are expecting a strong turnaround in the September reading, with a forecast of 1.8%.
Chinese Caixin Manufacturing PMI: Monday, 1:45. This PMI has managed to cross above the 50-point line only once this year, indicative of ongoing contraction in the manufacturing sector. The index showed very little change in the September reading, with a forecast of 47.2 points. The estimate for October stands at 47.7 points.
Commodity Prices: Monday, 5:30. This indicator continues to struggle, hit hard by weak global demand for Australian goods. The indicator posted another sharp decline in September, coming in at -21.3%.
Cash Rate: Tuesday, 3:30. The RBA is not expected to lower the benchmark rate when it announces the November rate. Currently, the rate stands at the round number of 2.00%. Still, traders should keep in mind that the RBA cut rates twice in 2015, each time catching the market off guard and sending the Aussie lower. So a rate cut should not be discounted completely.
AIG Services Index: Tuesday, 22:30. The index continues to post readings about the 50-point level, pointing to expansion in the services sector. The September report came in at 52.3 points, down from the previous month’s reading of 55.6 points.
Retail Sales: Wednesday, 00:30. Retail Sales is the primary gauge of consumer spending, and an unexpected reading can have a sharp impact on the movement of AUD/USD. The indicator bounced back in August with a gain of 0.4%, matching the forecast. The estimate for September stands at 0.4%.
Trade Balance: Wednesday, 00:30. Australia’s trade deficit swelled in August to A$3.10 billion, well above the estimate of A$2.48 billion, and marking a 4-month high. The forecast for the September release is A$2.85 billion.
RBA Governor Glenn Stevens Speaks: Wednesday, 22:25. Stevens will deliver remarks at a economic conference in Melbourne. Analysts will be listening closely for any hints about future monetary policy.
RBA Deputy Governor Philip Lowe Speaks : Thursday, 1:00. Lowe will speak at an event in Sydney. A speech which is more hawkish than expected is bullish for the Australian dollar.
AIG Construction Index: Thursday, 22:30. The index dipped to 51.9 points in September, lower than the previous month but still indicative of expansion. Will the indicator bounce back in the October report?
RBA Monetary Policy Statement: Thursday, 00:30. The policy statement follows the rate announcement earlier in the week, and may shed light on the RBA’s view of the economy and inflation. Traders should treat the statement as a market-mover.
RBA Assistant Governor Malcolm Edey Speaks: Friday, 1:00. Edey will speak at a conference in Gold Coast. The markets will be looking for hints about future monetary moves by the RBA.

* All times are GMT.

AUD/USD Technical Analysis

AUD/USD started the week at 0.7220 and climbed to a high of 0.7269. The pair then reversed directions sharply and dropped to a low of 0.7064, testing support at 0.7100 (discussed last week). The pair closed at 0.7133.

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

Technical lines from top to bottom:

0.7664 is a strong resistance line.

0.7440 capped the pair back in August, and remains key resistance.

0.7284 is the next resistance line.

0.7213 remains busy as the pair posted sharp losses. It is currently an immediate resistance line.

0.7160 has switched to a resistance role and is a weak line.

The round number of 0.7100 is providing support.

The very round level of 0.70 worked as a cushion in August and is the next support level.

0.69 has provided support since September.

0.6775 is the final support level for now.

I am bearish on AUD/USD

With the dramatic Fed statement, a rate hike in 2015 is once again a strong possibility, which is good news for the US dollar, as the greenback may look more attractive to investors and could make broad gains. The markets are not expecting the RBA to lower rates, but a surprise cut by the RBA could send the Australian dollar sharply lower.

In our latest podcast we explain why the Fed doves cry, the Chinese economy and upcoming events:

Kenny Fisher

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. Kenny's Google Profile

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