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AUD/USD  ended the week  almost  where  it started,  closing at 0.7034.  This week’s highlights are Trade Balance and the Cash Rate.  Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

Australian Retail Sales improved, matching expectations.  Final Chinese PMIs came out as expected, so the Aussie wasn’t hit by China this week. With the Golden week celebrations in China, can the Australian dollar find some stability? In the US, the NFP report was a huge disappointment. However, the weak Aussie failed to take advantage and remains perilously close to the key 0.70 level.

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

AUD_USD_Forecast.Oct.5-9

  1. AIG Services Index: Sunday, 22:30. The index continues to move upwards, and improved to 55.6 points in August, compared to 54.1 points a month earlier. Will we see a stronger report for September?
  2.  MI Inflation Gauge: Sunday, 23:30. This inflation index has been steady, posting small gains of 0.1% twice in the past three readings. This monthly release helps analysts track inflation, as official CPI reports are released only once per  quarter.
  3. ANZ Job Advertisements: Monday, 00:30. This indicator is an important gauge of the strength of the labor market. After a decline in July, the indicator bounced back in August with a strong gain of 1.0%. Will the good news continue in the upcoming release?
  4. Trade Balance: Tuesday, 00:30. This is the first key event of the week. The trade deficit narrowed to A$2.46 billion in July, well below the estimate of A$3.10 billion. This marked the lowest deficit in 4 months. The downward trend is expected to continue in August, with an estimate of A$2.36 billion.
  5. Cash Rate: Tuesday, 3:30. With Australia suffering from weak domestic growth and the Chinese slowdown hurting exports, there is pressure on the RBA to reduce interest rates from their present level of 2.0%. The markets are still assuming that the RBA will  not budge in its September rate announcement, but the central bank has surprised the markets in the past.
  6. AIG Construction Index: Tuesday, 22:30. The index jumped above the 50-point barrier in  July for the first time in 5 months, posting a reading of 53.8 points. A reading above 50 points to expansion in the construction sector.
  7. HIA New Home Sales: Wednesday, 00:00. The indicator has been struggling, with two declines in the past three readings. The July reading came in at -1.8%.
  8. RBA Assistant Governor Guy Debelle Speaks: Wednesday, 19:05. Debelle will speak at an event in Sydney. A speech which is more hawkish than expected is bullish for the Australian dollar.
  9. Home Loans: Friday, 00:30.  This  indicator is an important gauge of the level of activity in the housing sector. Home Loans disappointed in  July  with a weak gain of 0.3%, short of the forecast of  0.8%.  However, the markets are expecting a  strong  improvement in August, with an estimate of 5.1%.

* All times are GMT.

AUD/USD Technical Analysis

AUD/USD started the week at 0.7018 and  dropped to a low  of 0.6935.  The pair then recovered and climbed to a high of 0.7085,  as resistance held  firm at the round number of 0.71 (discussed last week) and closed at 0.7034.

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

Technical lines from top to bottom:

0.7440 capped the pair back in August, and remains key resistance. 0.7284 is a clear separator of ranges, also seen around the same time, and is also stronger.

The line of 0.7213 was a swing low before the recent crash, and serves as a minor line. 0.7160 capped the pair quite recently and could slow a rise.

The round 0.71 mark was challenged  again last week  and is immediate resistance. It is closely followed by 0.7060 which worked in both directions  of late.

The very round level of 0.70 worked as a cushion in August and is under strong pressure. 0.6930 is where the pair bounced from in September.

The round level of 0.69 is next. This is followed by 0.6775.

The final support line for now is 0.6623.

I remain  bearish on AUD/USD

Weak job numbers out of the US could point to a slowdown, but the Aussie couldn’t move higher and continues to be hampered by weaker growth in China, which is Australia’s number one trading partner. The 0.70 line is under strong pressure, and could break next week.

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