AUD/USD Forecast November 3-7

AUD/USD  showed little change last week, closing at 0.8766. The upcoming week is busy, with 14 releases. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

As expected, the Fed ended its QE program,    a vote of confidence for the economy from the powerful Fed. The Fed released a hawkish policy statement, which  helped bolster the greenback. In Australia, PPI matched the forecast with a weak gain of 0.2%.

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

1. AIG Manufacturing Index: Sunday, 22:30. This index provides a snapshot of activity in the Australian  manufacturing sector. The indicator has managed to crack the 50 level just once in 2014, indicative of ongoing contraction. The previous release came in at 46.5 points.
2. MI Inflation Gauge: Sunday, 23:30. This monthly indicator helps analysts track CPI, which is released each quarter.  Recent readings have not strayed far from the 0.0% level, with the past release coming in at 0.1%.
3. Building Approvals: Monday, 00:30.  This indicator tends to show sharp movement, resulting in readings that are well off the forecast. The previous release showed a gains of 3.0%, above the estimate of 1.1%. The markets are expecting a decline of -0.9% in the upcoming release.
4. ANZ Job Advertisements: Monday, 00:30. Job Advertisements  is an important gauge of  the health of the labor market. The indicator has shown gains for four straight months and posted a gain of 0.9% in September.
5. Chinese HSBC Final Manufacturing PMI: Monday, 1:45. The Aussie is sensitive to key Chinese releases, as China is Australia’s number one trading partner. The  previous reading  came in at 50.2 points, just above the 50 level which separates contraction from expansion.  More of the same is expected in the upcoming reading, with an estimate of 50.4 points.
6. Commodity Prices: Monday, 5:30. With the global slowdown showing no signs of improvement, commodity prices continue to lose ground. The indicator posted a particularly sharp decline of 16.8% last month.
7. Retail Sales: Tuesday, 00:30. Retail Sales is the primary gauge of consumer spending, a key component of economic growth. The indicator posted a weak gain of 0.1% last month, off the estimate of 0.4%. The forecast for the upcoming release stands at 0.3%.
8. Trade Balance: Tuesday, 00:30. Australia continues to  post a trade deficit,  with a reading of AUD -0.79  billion last month, which was within expectations. The markets are  expecting a larger deficit in September, with an estimate of AUD -1.78 billion. Trade Balance is closely linked to currency demand, so a weak reading could weigh on the Aussie.
9. Cash Rate: Tuesday, 3:30. The RBA has  maintained the benchmark rate at 2.50%  since July 2013, and no change is expected. The RBA will announce  its decision  in a rate statement.
10. AIG Services Index: Tuesday, 22:30. The index has been below the 50 level since February, pointing to ongoing contraction in the services sector. The September reading slipped to 45.4 points.
11. Employment Change: Thursday, 00:30. This key event can have a major impact on the direction of AUD/USD. The indicator looked awful last month, posting a loss of 29.7 thousand jobs. This surprised the markets, which had expected a gain of 17.6. thousand. The markets are expecting a sharp turnaround, with an estimate of +10.3 thousand. The Unemployment Rate is expected to stay unchanged at 6.1%.
12. AIG Construction Index: Thursday, 22:30. The index is pointing to  expansion in the  construction sector, with four consecutive readings above the 50 level. The indicator showed a strong gain in the previous release, climbing to 59.1 points.
13. RBA Monetary Policy Statement: Friday, 00:30. The RBA releases a policy statement once a quarter, and this release, coming on the heels of the rate announcement, could be a market-mover. The markets will be looking for hints as to the RBA’s future monetary policy, especially interest rate levels.
14. Chinese Trade Balance: Saturday, Tentative. The slowdown in China is worrying the global markets. China’s trade surplus slid to $31.0 billion, down from $49.8 billion a month earlier. This was well short of the estimate of $41.2 billion. The markets are expecting an improvement in the  September release, with an estimate of $35.6 billion.

* All times are GMT.

AUD/USD Technical Analysis

AUD/USD  started the week  at 0.8804 and climbed to a high of 0.8911. The pair then reversed directions and dropped  to a low of  0.8755, as support held at 0.8750 (discussed last week). AUD/USD closed the week at 0.8766.

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

Technical  lines from top to bottom:

We  begin  with  resistance at 0.9270. This line supported the pair in August but reverted to resistance in September  with the Australian dollar sustaining steep losses.

0.9175  remains a strong resistance line. The round number of 0.9000  is next.

0.8891  continues to provide strong resistance.  AUD/USD broke above this line before retracting sharply.

0.8750 held firm in support as the pair  reversed directions after  posting strong gains.  It is an immediate support line, and could see activity early in the week.

0.8660  continues to provide strong support.

0.8550 has  held  firm since  December 2007.

0.8316 marked the start low point of a US dollar rally which saw the greenback climb above the 1.10 level.

0.8150 is our final support line for now. It has remained intact since September 2007.

I  am bearish  on AUD/USD.

The US dollar has benefited from a US economy which continues to expand at an impressive clip,  led by  a strong GDP and excellent consumer confidence numbers.  With the Fed giving the economy a thumbs up and concluding QE last week, the next move is a rate hike in 2015. Down Under, the RBA is unlikely to tinker with rates, and  this week’s key numbers  will  have to be strong if the Aussie hopes to hold its own against the US dollar.

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 the Australian dollar (Aussie), check out the  AUD to USD forecast.
• USD/CAD (loonie), check out the  Canadian dollar.