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AUD/USD  had a quiet week, as the pair traded in a narrow range, and closed the week  at 1.0378.  The upcoming week has four releases, including  the key CPI release.  Here is an outlook for the Australian events, and an updated technical analysis for AUD/USD.

With the markets focused on the dark clouds over Spain and the disappointing data coming out of the US, AUD/USD showed little  movement this week. Australian data was mixed, as new vehicle sales improved, but business confidence sagged. Will the pair break out of range this week?

Updates: PPI was a major disppointment, falling by 0.3%. This was a nine-month low for the index, and surprised the markets, which had predicted a 0.5% increase. Chinese Flash Manufacturing PMI posted a reading of 49.1, slightly above the March reading. CPI rose a modest 0.1%, well below the market forecast of 0.7%. Trimmed Mean CPI  posted a reading of 0.3%, which was also  below the market  prediction of 0.6%.  The Chinese Leading Index is came in at 0.8%, unchanged from the reading in March. The  aussie is showing weakness, dropping under  the 1.03 level.  AUD/USD is trading at 1.0280.  CPI edged upwards to 0.1%, surprising the markets, which had predicted an increase of 0.7%. Trimmed Mean CPI also came in below the market forecast of 0.6%. It  posted a reading  of 0.3%. AUD/USD has bounced back above the 1.03 level, trading at 1.0337. The Leading Index was a disappointment, posting a flat reading of 0.0%. This was a sharp drop from the previous month, when the index was up by 1.1%. AUD/USD is showing little movement in the mid-1.03 range, trading at 1.0367.

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

  1. PPI: Monday, 1:30. The Producer Price Index, released each quarter, posted a reading of just 0.3% in March. This was the index’s weakest reading since January 2011. The markets are predicting a stronger reading in May, calling for an increase of 0.6%.
  2. Chinese Flash Manufacturing PMI: Monday, 2:30. The index has not been above the 50.0 level, which indicates industry expansion, since October 2011. With recent economic indicators pointing to a slowdown in China, the April reading could be disappointing. Given that  the Asian giant  is Australia’s most important trading partner, weak Chinese indicators can hurt the aussie in a hurry.
  3. CPI:  Tuesday, 1:30.   This inflation index is published quarterly, and an unexpected reading could affect the movement of AUD/USD. The index posted a flat 0.0 % reading in January, its lowest figure since January 2009. The markets are forecasting a jump of 0.8% in April.   If the index can meet or beat this prediction, the Australian dollar could move upwards.
  4. CB Leading Index: Thursday, 00:00. This composite index is based on seven economic indicators. The index rose 1.1% in March, its best performance dating back to October 2009. Will the index again show strong numbers in April?

* All times are GMT

AUD/USD Technical Analysis

AUD/USD opened at 1.0339. The pair dropped to a low of 1.0305, before rebounding, as it broke through resistance at 1.0402 (discussed last week)  to reach a high of 1.0418. The pair closed the week with little change, at 1.0378.

Technical levels from top to bottom:

We  start with resistance at 1.0886, which was last breached in August 2011. Next, there is resistance at the round number of 1.08, which AUD/USD last tested in February. Below, there is resistance at 1.0724. This line  has strengthened as the pair has traded at lower levels since early March.

This is followed by strong resistance at 1.0650. The pair exhibited quite a bit of movement around the 1.0525 line in March. This line continues to provide resistance to the pair. Below, 1.0402 is a fluid line, as it was again breached this week on the upswing by AUD/USD. It is  now providing  weak resistance to AUD/USD and could fall if the aussie rebounds.

Close by, 1.0340 is providing the pair with weak support.  This line has been tested several times in April, and we could see this line continue to come under further attack. Next there is  support level at 1.0230. This line has  held steady since January.

Below, the pair is supported at 1.0080, which is protecting the all-important parity level.  This level  has not been breached since December 2011, and looks safe in the short-term. The final support level for now is at 0.9964, a strong support level dating back to December 2011.

I am  bearish on AUD/USD.

The pair has been on a clear downward spiral since the end of February. A weak Australian economy and slower growth in China  continue to take their toll on  the Australian dollar.    Moreover, with  weak employment data in the US and the deep concern over Spain, investors could flock to safe haven currencies like the US dollar at the expense of  the aussie.

Further reading: