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AUD/USD reversed direction last week, as the pair lost close to a cent, closing  the week at 0.9582. This week’s highlights include Building  Approvals and PPI.  Here is an outlook of the events and an updated technical analysis for AUD/USD.

Australian CPI was stronger than expected, while in the US, employment and manufacturing data disappointed. However, the Aussie was unable to capitalize on these releases, and lost ground to the US dollar.

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AUD/USD graph with support and resistance lines on it. Click to enlarge:  AUD USD Outlook Oct 28-Nov 1.

  1. RBA Governor Glenn Stevens Speaks: Monday, 22:30. Stevens will address an investment conference in Sydney. Analysts will be looking for clues as to the RBA’s future monetary policy.
  2. HIA New Home Sales: Thursday, Tentative. This indicator provides a snapshot of the health of the Australian housing sector. The indicator tends to fluctuate and posted a strong gain of 3.4% in August. The markets will be looking for another solid gain in the upcoming release.
  3. Building Approvals: Thursday, 00:30. This key indicator fluctuates sharply,  leading to estimates which are often  well off the  mark.  The previous release came in at -4.7%, well below the estimate of -0.7%. The markets are expecting a turnaround in September, with an estimate of 2.9%. Will  the indicator rebound this  month with  a strong reading?
  4. Import Prices: Thursday, 00:30. Import Prices, which are released each quarter,  have looked weak in recent readings, and the Q2 release came in at -0.3%. The estimate stood at 1.9%. The markets are anticpating a strong turnaround in Q3,  with an estimate of 3.5%.
  5. Private Sector Credit: Thursday, 00:30. An increase in this indicator means that consumers and businesses are spending more, which is vital for ecnomic growth. The indicator has been very steady, and posted a gain of 0.3% last month. The September estimate stands at 0.4%.
  6. AIG Manufacturing Index: Thursday, 22:30. This indicator rose to 51.7 points in August, its first reading above the 50-point level in almost two years. This means that the manufacturing sector has been in a contraction mode for an extended period of time. The markets will ne hoping for another reading above 50 for September.
  7. PPI: Friday, 00:30. Producer Price Index is a key inflation indicator and the quarterly release should be treated as a market-mover. The Q2 reading posted a gain of just 0.2%, its lowest in over a year. This figure disappointed the markets, which had expected a gain of 0.5%. The estimate for Q3 calls for  a gain of 0.3%.
  8. Chinese Manufacturing PMI: Friday, 1:00. Chinese key releases often impact on the Australian dollar, as China is Australia’s number one trading partner. The previous release came in at 51.1 points, and an almost identical reading is expected for October.
  9. Commodity Prices: Friday, 5:30. This indicator continues to lose ground, as commodity prices suffer from weak global demand. However, the declines have been getting smaller, and the October drop was just 3.1%. The markets will be hoping that the improving trend continues in the upcoming release.

AUD/USD Technical Analysis

AUD/USD started the week at 0.9560 and  rose to a high  of 0.9757. The pair then reversed course, dropping below the 0.96 line and touching a low of 0.9572. The pair closed the week at 0.9582, as support at 0.9556 (discussed last week) remained intact.

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

 

Technical lines from top to bottom:

We  begin with resistance at 1.0093. This line was last breached in mid-May, when the Aussie was in the midst of a sharp downturn.

Parity  remains a key resistance line. This psychologically significant level has remained intact since May.

Next, there is resistance at 0.9913. This is followed by resistance at 0.9828.

The line of 0.9751 provided key resistance in early June and last week  marks  the  first time it  has been  tested since that time. With AUD/USD losing ground, it remains a strong resistance line.

0.9670 was a cap for the pair in late May. It was briefly breached last week but continues in a resistance role.

0.9556 held firm as the pair lost ground and dropped below  0.96. It is providing weak support and could be tested early next week.

0.9428 was busy in the first half of October and continues to provide the pair with strong support.

0.9283 saw a lot of action in the months of June and July, alternating between resistance and support roles. It has provided steady support since mid-September.

0.9180 is the next support level. This is followed by the round number of 0.9000, our final line for now. This psychologically important level was breached in early September, when the Australian dollar started a strong rally which saw it break past the 0.95 line.

I am  bearish on AUD/USD.

US releases did not impress this week, but the Australian dollar failed to move higher. There is room for AUD/USD to retract, and we could see the Aussie lose ground if US releases rebound this week.