Quarterly inflation figures, as well as other indicators, will shape the direction of the Aussie this week. Here’s an outlook for the Australian events and an updated technical analysis for AUD/USD.
AUD/USD chart with support and resistance lines marked. Click to enlarge:
Following the recent rate hike, there were doubts about the next move. At the beginning of the week, the meeting minutes suggested a further rate hike, but Glenn Stevens cooled the expectations in a speech towards the end of the week. Inflation is one of the keys. Let’s start:
- NAB Quarterly Business Confidence: Exact publication time is unknown at the moment – delayed from last week. National Bank Australia’s quarterly version of its survey of 1,000 businesses has been positive in the past 2 quarters, scoring 16 and 18 points. A small drop can be seen this time.
- PPI: Published on Tuesday at 1:30 GMT. Constray to consumer prices, producer prices fell in the past quarter (0.4%) and missed expectations in the past 4 quarters. This time, a rise of 0.7% is expected in the PPI.
- Guy Debelle talks: Starts speaking on Tuesday at 22:30 GMT. After Glenn Stevens downplayed the option of a rate hike in the upcoming decision, the RBA Assistant Governor will also have a chance to send hints. Will they be in line with Stevens?
- CPI: Published on Wednesday at 1:30 GMT. Q4 CPI was slightly better than expected – 0.5%. Despite rate hikes since that release, consumer prices are predicted to rise by 0.9% this time. Glenn Stevens might have to re-think his statement about rates “reaching normal levels” if prices rise by over 1% in Q1. As there still uncertainty about the next meeting, this is one of of the key indicators, and will rock the Aussie. Also note the Trimmed Mean CPI (= Core CPI) which is expected to rise by 0.7%.
- CB Leading Index: Published on Thursday at midnight GMT. Many of the 7 components of this index have already been released. Nevertheless, the release always moves the Aussie. The index is moving between drops and rises every month. The 0.2% drop last time will probably be followed by a rise this time.
- HIA New Home Sales: Published during Friday. The Housing Industry Association shows strong moves in home sales. A leap of 9.5% two months ago was followed by a 5.2% drop last time. A modest rise is predicted this time.
- Private Sector Credit: Published Friday at 1:30 GMT. Credit has been steadily growing in recent months, showing that consumers are ready to spend more. A third consecutive rise of 0.4% is predicted in this indicator.
AUD/USD Technical Analysis
After starting lower, the Aussie moved higher, but failed to break the 0.9327 resistance line once again. It then fell and bounced back only at the 0.9170 support line, to close at 0.9274.
I’ve added some lines on last week’s outlook. The current range is between the minor support line of 0.9250 and 0.9327, a line that proved strong many times in the past.
Higher, 0.9366 is a minor line of resistance, followed by 0.9405, the 2009 high, which is still a strong barrier.
Looking down, 0.9170 continues to work as a support line, followed by 0.9090 and 0.90 – which was a swing low, and also a round number. Further down, 0.8735, December’s low, is a distant support line.
I remain bullish on AUD/USD.
Australian fundamentals, China’s growth, the high interest rate and the rising price of commodities continue to support the currency.
- For a broad view of all the week’s major event in all currencies, read the forex weekly outlook.
- For the Euro, read the EUR USD Forecast.
- For the British Pound, look into the GBP/USD forecast.
- For USD/CAD, check out the Canadian dollar forecast.
- For the kiwi, here’s the NZD/USD forecast.
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