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AUD/USD  was almost unchanged last week, closing at 0.8786. There are just four events this week, highlighted by PPI. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

Australian data met expectations and the RBA minutes showed  highlighted continuing  concern at the RBA with the high value of the Australian dollar. In the US, data was generally positive, with jobless claims and inflation holding on. However, New Homes Sales slumped in September, allowing the Aussie to recover ground on Friday.

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

AUDUSDForecast Oct27-31

  1. HIA New Home Sales: Thursday, Tentative. This index provides a snapshot of activity in the Australian housing sector. The indicator has shown strong fluctuations, alternating between gains and declines. The previous release came in at 3.3%. Will the indicator break the trend and produce another gain this month?
  2. Import Prices: Thursday, 00:30. Import prices  are an important contributor to inflation, and the quarterly release magnifies the impact of each reading. The indicator looked weak in Q2, with a decline of 3.0%. The markets are expecting better news in Q3, with a forecast of a 0.3% gain.
  3. PPI: Friday, 00:30.  The Producer Price Index looks at inflation in the manufacturing sector. It is the key event of the week and should be treated as a market-mover. The index posted a decline of 0.1% in Q2, its worst showing in over two years. This was well off the estimate of 0.7%. The markets are expecting a turnaround in Q3, with the estimate standing at 0.3%.
  4. Chinese Manufacturing PMI: Saturday, 1:00. The Aussie is sensitive to key Chinese releases, as China is Australia’s number one trading partner. The indicator is pointing to slight expansion,  having posted two  straight readings of  51.1 points. No change is expected in the upcoming release.

* All times are GMT.

AUD/USD Technical Analysis

AUD/USD  started the week  at 0.8755 and climbed to a high of 0.8833. The pair then reversed directions and broke below support at 0.8750, dropping to a low of  0.8719 (discussed last week). AUD/USD then recovered, closing the week at 0.8786.

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. It has held firm since early October.

0.8750 was briefly breached for a  third straight week, but recovered. It is an immediate support line, and could see activity early in the week.

0.8660  continues to provide strong support.

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.

The markets are expecting a strong GDP for Q3  the US, and if the indicator delivers, the US dollar should have a good week. As well, the Fed is likely to wrap up QE, which should put the markets in a positive mood about the US dollar, as the focus shifts to the timing of a rate hike, which is widely expected in 2015. The Aussie has been struggling, and there’s more room for the shaky currency to drop against the US dollar.

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