In the US, durable goods orders were mixed. Advance GDP beat expectations at 2.9%, but the internals were mixed. UoM Consumer Sentiment dropped to its lowest level since September 2015 and missed expectations. In Australia, third quarter CPI impressed with a gain of 0.7%, above the estimate.
[do action=”autoupdate” tag=”AUDUSDUpdate”/]AUD/USD was unchanged for a third straight week, as the pair closed slightly below the 0.76 line. This week’s key highlights are the Cash Rate and Retail Sales. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.
AUD/USD graph with support and resistance lines on it. Click to enlarge:
- MI Inflation Gauge: Monday, 00:00. The monthly indicator helps analysts predict CPI, which is released each quarter. In September, the indicator improved to 0.4%. Will the indicator improve in October?
- Private Sector Credit: Monday, 00:30. Borrowing and spending levels are closely linked, so this indicator is carefully monitored by analysts. The indicator has posted two straight gains of 0.4% and an identical reading is expected in the October report.
- AIG Manufacturing Index: Monday, 22:30. The index has recorded two straight readings below the 50-level, which points to contraction in the manufacturing sector. Will the indicator improve in October?
- Chinese Manufacturing PMI: Tuesday, 1:00. Key Chinese indicators can have a significant impact on the Australian dollar, as China is Australia’s largest trading partner. The indicator has come in at 50.4 points for the past two months, pointing to a stagnant manufacturing sector. Little change is expected in the October report.
- Caixin Manufacturing PMI: Tuesday, 1:45. The index remains close to the 50-level and the estimate for the October reading stands at 50.2 points.
- Cash Rate: Tuesday, 3:30. The benchmark interest rate has been pegged at 1.50% since August. No change is expected in the upcoming release. The RBA will make its announcement in a rate statement.
- Commodity Prices: Tuesday, 5:30. Commodity prices continue to improve and posted a gain of 3.1% in September. Will the upswing continue in October?
- Building Approvals: Wednesday, 00:30. The indicator tends to show strong movement, making accurate predictions a tricky task. In September, the indicator declined 1.8%, better than the forecast of a 5.8% decline. The estimate for the October estimate stands at -2.8%.
- AIG Services Index: Wednesday, 22:30. The index has dropped below the 50-level for two straight readings, pointing to contraction in the services index.
- Trade Balance: Thursday, 00:30. Trade balance is closely linked to currency demand. Australia’s deficit narrowed to A$2.01 billion in August, better than the forecast of A$2.32 billion. The positive trend is expected to continue in September, with an estimate of A$1.71 billion.
- RBA Monetary Policy Statement: Friday, 00:30. This statement is published each quarter. The report details the bank’s view of economic conditions and inflation, key factors which the RBA examines when determining its monetary policy.
- Retail Sales: Friday, 00:30. The week wraps up with this key release. The indicator posted a gain of 0.4% in August, its highest level since March. The forecast for the September report is 0.4%.
AUD/USD Technical Analysis
AUD/USD opened the week at 0.7602 and touched a high of 0.7709. The pair then reversed directions and dropped to a low of 0.7556, breaking support at 0.7597 (discussed last week). AUD/USD closed the week at 0.7581.
Live chart of AUD/USD:
Technical lines from top to bottom:
We begin with resistance at 0.8066.
0.7938 is next.
0.7835 has held firm since April.
0.7691 was a cap for much of October.
0.7597 remains busy and has switched to a resistance role.
0.7513 is a weak support level.
0.7427 marked the low point for the month of September.
0.7334 was a cap in December 2015.
0.7194 is the final support line for now.
I remain bearish on AUD/USD
With the odds of a Fed rate hike in December priced in above 70%, market sentiment remains positive towards the US dollar. The US economy remains strong and continues to outperform the Australian economy, which is grappling with weak inflation and sluggish global demand for its exports.
is bullish for the US dollar.
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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 Canadian dollar (loonie), check out the Canadian dollar forecast.
- For the kiwi, see the NZD/USD forecast.
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