The Australian dollar was on the back foot, partly due to the “risk off” sentiment. Is the battle for 0.80 over? The rate decision is the big event for the week, but certainly not the only one. Here are the highlights of the week and an updated technical analysis for AUD/USD.
North Korea’s statement that the “US has declared war” weighed on sentiment and sent risk currencies such as the Aussie lower. The RBA is not that keen on raising rates. Later on, the US dollar surged on optimism, mostly stemming from hopes for a massive tax reform in the US.Updates:
- Oct 7, 10:08: Can AUD/USD bounce from the lows?: AUD/USD suffered from the RBA’s dovish words and the strength of the US dollar. But, perhaps this is a buying...
- Oct 6, 14:30: Non-Farm Payrolls fall by 33K – wages up 0.5% – USD wobbles: The US jobs report is totally off the charts: a drop, yes a drop of 33K jobs. This hasn’t happened...
- Oct 6, 8:33: AUD/USD falls to the lowest since July on more dovish talk: The Australian dollar falls under 0.78 and probably in order to stay there. The pair reached a low of 0.7743...
- Oct 5, 16:00: Data drives the dollar higher and higher: And, also the Fed helps. US jobless claims came out at 260K, better than 266K expected. The US trade deficit...
- Oct 4, 16:00: ISM Non-Manufacturing PMI leaps to 59.8 – USD follows: US data continues beating expectations. The services sector enjoys robust growth according to ISM’s survey. The ISM Non-Manufacturing PMI jumps...
- Oct 4, 14:15: ADP Non-Farm Payrolls beats with 135K – USD ticks higher: A slightly better than expected gain in private sector jobs: 135K according to ADP. The number is still significantly lower...
- Oct 3, 10:19: RBA keeps the pressure on AUD/USD: The Reserve Bank of Australia left its interest rates unchanged at 1.5%, as widely expected. However, they seem to have...
- Oct 2, 16:25: Euro troubles and golden opportunities – MM #159: We tour through Europe: Germany’s elections, France’s ambitions and the chaos in Catalonia. We then continue to talk about the...
- Oct 2, 16:00: ISM Manufacturing PMI beats with 60.8 – USD looks good: The US manufacturing sector seems to be on fire, at least according to the forward-looking ISM Manufacturing PMI. the indicator...
AUD/USD daily graph with support and resistance lines on it. Click to enlarge:
- AIG Manufacturing Index: Sunday, 22:30. The Australian Industry Group has shown very robust growth in the manufacturing sector: a score of 59.8 points in August, well above the 50-point threshold that separates contraction and expansion.
- MI Inflation Gauge: Monday, 00:00. The Melbourne Institute’s inflation gauge fills a gap: Australia publishes its inflation figures only once per quarter. Prices rose by 0.1% in August, the same as in July and in June. A similar figure is likely.
- HIA New Home Sales: Tuesday, 00:00. The Housing Industry Association has reported two months of drops in sales of new homes. After a slide of 3.7% in July, we could see a bounce in the report for August.
- Building Approvals: Tuesday, 00:30. Permits for building new homes dropped by 1.7% in July, but that came after a surge of 11.7% in June. Volatility is expected to continue in August.
- Rate decision: Tuesday, 3:30. The Reserve Bank of Australia is firmly in “neutral”. In a recent public appearance by RBA Governor Phillip Lowe, he reiterated that interest rates are set to remain stable for the time being. The language about the Australian dollar will be interesting to watch in the statement. The RBA has complained about the exchange rate but not in an aggressive manner. Will it change now?
- Commodity Prices: Tuesday, 5:30. Prices of commodities have risen by a whopping 20.1% y/y in August and this is positive for the Australian economy. Another yearly rise is on the cards now. Goldman Sachs recently said that iron prices are set to continue rising.
- AIG Services Index: Tuesday, 22:30. The services sector is not doing as well as the manufacturing one, with the PMI slipping to 53 points in August.
- Retail Sales: Thursday, 00:30. The volume of sales disappointed in July by remaining flat. Consumers did not spend as expected. Will it rise now?
- Trade Balance: Thursday, 00:30. Australia had a trade surplus in June, but it came out below expectations for the second month in a row. After 0.46 billion in June, we could see a wider surplus now for July.
- AIG Construction Index: Thursday, 22:30. The last PMI-like figure from AIG has fallen quite a bit in August: from 60.5 to 55.3. However, this is still a positive number.
AUD/USD Technical Analysis
The Australian was struggling early in the week, unable to hold onto support at 0.7920 (mentioned last week).
Technical lines from top to bottom:
0.83 was a swing high seen in early 2015 and is our top line. 0.8165 was another swing high, back in May 2015. The new high of 2017 at 0.8125 is becoming interesting as well.
0.8065 is the previous 2017 high. It is followed by the psychological round level of 0.80.
0.7920 was the low point the pair reached after the pair moved to the highs. The round number of 0.7810 provided support in August and replaces the veteran 0.7835 level.
Below, we find 0.7740, that was a high point in June 2017 and also beforehand. 0.7635 was a stepping-stone on the way up, also in June.
Even lower, we find 0.7565 was a low point before the pair shot higher in July. The last line, for now, is 0.7515.
I am bearish on AUD/USD
The RBA could take advantage of the recent weakness in the exchange rate and hit the Aussie when it is down.
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