AUD/USD Forecast Oct. 20-24

AUD/USD  was marked  by choppy trading this week and posted modest gains. AUD/USD closed  at 0.8743. This week’s highlights are the RBA minutes and CPI. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

The US dollar  lost  ground to its Australian counterpart last week,  thanks to  soft US retail sales and another weak inflation reading from PPI. On a brighter note,  Unemployment Claims tumbled and  hit a 10-year low. In Australia, Business Confidence slipped, but New Motor Vehicle Sales  posted a strong gain.

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

1. RBA Assistant Governor Christopher Kent Speaks: Sunday, 23:30. Kent will deliver remarks at an event in Adelaide. A speech that is more hawkish than expected is bullish for the Australian dollar.
2. RBA Monetary Policy Meeting Minutes: Tuesday, 00:30. The minutes provide details of the RBA policy meeting which took place earlier in October. Analysts will be looking for factors which led the central bank to maintain rates. As well, comments about the high value of the Aussie could weigh on the currency.
3. Chinese GDP: Tuesday, 2:00.  The Aussie is sensitive to key Chinese releases, as China is Australia’s number one trading partner. GDP for Q2 showed a gain of 7.4%, within expectations. The Q3 estimate stands at 7.2%, and if the markets show concern about falling GDP, the Aussie could lose ground.
4. Chinese Industrial Production: Tuesday, 2:00. Industrial Production has been  around the  9% in recent readings, but the indicator slid to just 6.9% in the August reading. This was well off the estimate of 8.8%. The forecast for the upcoming release stands at 7.5%.
5. RBA  Deputy Governor Philip Lowe  Speaks: Tuesday, 8:55. Lowe will speak at a financial conference in Sydney. With other RBA policymakers also conducting public speaking engagements this week, the markets will be listening for clues as to future monetary policy.
6. CB  Leading Index: Tuesday, 23:00. This index is based on 7 economic indicators, but is considered a minor event since most of the data has already been released. The index has moved higher for three straight months, posting a gain of 0.5% last month.
7. MI  Leading Index: Tuesday, 23:30. This minor event has looked sluggish throughout 2014 and  has posted two consecutive declines of -0.1%.  
8. CPI: Wednesday, 00:30.  CPI, which is released quarterly,  is the primary gauge of consumer inflation. The index continues to  weaken, and fell  to 0.5% in Q2. The downward trend is expected to continue, with an estimate standing at 0.4%.
9. Trimmed Mean CPI: Wednesday, 00:30. Trimmed Mean CPI excludes the most volatile items which make up CPI, providing a more accurate underlying trend. The Q2 reading came in at 0.8%, matching the forecast. The forecast for Q3 stands at 0.6%.
10. RBA Governor Glenn Stevens Speaks: Wednesday, 21:00. Stevens will address a financial conference in Sydney. The Governor has made bold public statements in the past, and any comments about the health of the economy or about the Australian dollar could affect the movement of AUD/USD.
11. NAB Quarterly Business Confidence: Thursday, 00:30. Business confidence is an important component of economic growth, so  an unexpected  reading from this indicator can affect the direction of AUD/USD. The indicator has posted two straight readings of 6 points.
12. HSBC Flash Manufacturing PMI: Thursday, 1:45. This indicator is an important gauge of the health of the Chinese manufacturing sector. The past two readings have edged above the 50-point level, which separates contraction from expansion. Little change is expected in the September reading, which stands at 50.2 points.

* All times are GMT.

AUD/USD Technical Analysis

AUD/USD  started the week  at 0.8676 and dropped to a low of 0.8649. The pair  then reversed directions and climbed all the way to 0.8860, held in check by resistance at 0.8891(discussed last week). AUD/USD then retracted, closing the week at 0.8743.

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

Technical  lines from top to bottom:

We  start  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 in  a resistance role. The line held firm for the second straight week as the pair posted sharp gains before retracting.

0.8750 was briefly breached for a second straight week, but recovered. It is currently a weak resistance line.

0.8660  has strengthened in support as the pair trades at higher levels.

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.

US data remains strong overall, led by solid employment numbers. The US economy has been outperforming that of Australia, and the continued divergence in monetary stance between the two countries could lead to the US dollar resuming its gains at the expense of the Aussie.

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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.