AUD/USD Outlook April 4-8

The Aussie seems unstoppable, moving in one direction only – up. Will this trend continue or will it take a break? The Aussie now faces important tests – a rate decision and employment figures. Here’s an outlook for the Australian events, and an updated technical analysis for AUD/USD.

The Aussie showed its strength with the initial reaction to the US Non-Farm Payrolls. While some currencies dipped, AUD/USD remained very stable, and later continued rising. Where will this stop?

AUD/USD daily chart with support and resistance lines marked. Click to enlarge:

1. MI Inflation Gauge: Monday, 00:30. The Australian government releases official inflation numbers only once per quarter. So, this gauge by the Melbourne Institute is useful for filling the gap. The indicator has been rather stable in recent months, and it’s expected to stay around last month’s 0.2% rise.
2. ANZ Job Advertisements: Monday, 1:30. This gauge of jobs is considered very predictive towards the official employment figures later in the week. ANZ has shown a rise of 1.2% in job advertisements last month. This time, the rise is expected to be more moderate.
3. AIG Services Index: Monday, 23:30. The Australian Industry Group provides a PMI-like indicator for various sectors. According to AIG, the services sector is still contracting, with the score still under 50 points – still in contraction zone, although it is improving. A rise above 50 this time can boost the Aussie.
4. Trade Balance: Tuesday, 1:30. Australia  enjoys a nice surplus in its balance of goods for several months, with the past two exceeding expectations. This important indicator gave a boost to the Aussie last time, when it remained high, at 1.88 billion. Expectations are low this time, with a drop to 1.15 billion.
5. Rate decision: Tuesday, 4:30. Glenn Stevens is expected to leave the interest rate unchanged at 4.75%. After a series of pauses that followed a series of hikes, there were talks that the RBA could cut the rates this year. But the Australian economy is still doing well, and therefore the “wait and see” mode of leaving the rates unchanged is likely to continue for another month. The accompanying statement will be closely watched as it will probably hint about future moves.
6. Home Loans: Wednesday, 1:30. While this indicator is very volatile, it still has a strong impact on the Aussie. According to the government, the number of new loans dropped by 4.5%, quite disappointing. Another fall is expected not – 2.%.
7. AIG Construction Index: Wednesday, 23:30. According to AIG, also the construction sector is contracting, but the situation here is worse than the services sector, with the score only at 44.6 points. A small improvement is predicted, but the figure is likely to remain under 50.
8. Employment data: Thursday, 1:30. Last but not least, any result here will shake the Aussie. Last month saw a drop in jobs – this was quite unusual and rather disappointing, but the Aussie managed overcome. This time, a gain of 23K is expected to compensate (and more) for the drop of 10K last month. A rise of above 35K will give a huge boost. The unemployment rate is predicted to remain unchanged at 5% for a fourth consecutive month.

* All times are GMT.

AUD/USD Technical Analysis

After another struggle with the previous historic high of 1.0254, AUD/USD continued north and managed to conquer 1.0315 (A new line,that didn’t appear last week), before closing at 1.0385.

Looking up, the Aussie now stopped just under the round number of 1.04, so this line serves as first resistance in unchartered territory. It’s followed by the next round number of of 1.05. There aren’t many lines up there.

Looking down, 1.0315, which was a peak after the first rise above 1.0254, and worked as support in the past week, is now another line of support.

1.0254, the level reached at the end of 2010 that was the previous historic high and is now support. It’s still important. It’s followed by 1.0180, which was the previous high in November, and worked since then as a tough resistance line.

Below, 1.0080 was often the cushion when the Aussie was trading at these highs and also worked as support. It’s followed by the obvious line of parity, which is weaker than earlier, but is still of importance.

Under parity, we find  0.9940, which provided support upon dips under parity. Further minor support is at 0.9866, which had a role in recent months.

Further below lower we find 0.98, previously the lowest level in 2011, but this was temporarily breached now just two weeks. It’s followed by 0.9724, which provided support back in November, and proved its strength now as well. There are further lines lower, but they’re too far now

I am neutral on the Aussie.

These rises are justified and the Aussie will continue showing relative strength, but these very big moves are likely to be consolidated, at least temporarily. In order to continue rising now, the Aussie needs a very impressive jobs report.

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/Dollar forecast.
• For the Japanese yen, read the  USD/JPY forecast.
• For GBP/USD  (cable), look into the  British Pound forecast.
• For the New Zealand dollar (kiwi), read the  NZD forecast.
• For USD/CAD (loonie), check out the  Canadian dollar.