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The Aussie managed to close the week higher, but it is still capped by resistance. The upcoming week is very busy, with no less than 8 indicators awaiting us. Here is an outlook for these events and an updated technical analysis for AUD/USD.

The assumption about no new QE in the US hurt the Aussie, but when markets changed their mind, things turned for the better in AUD/USD. The Australian dollar got a boost from a better-than-expected number in China – HSBC’s PMI came out better than expected. We’ll now get the official release.

AUD/USD daily chart with support and resistance lines marked. Click to enlarge:Australian Dollar Chart August 29 September 2 2011

  1. HIA New Home Sales: Publication time unknown at the moment. According to the Housing Industry Association, sales of new homes plunged by 8.7% last month. A small correction is likely now, although Australia’s housing market remains very weak. Some say it is a bubble.
  2. Building Approvals: Tuesday, 1:30. Also the second housing sector figure has shown weakness of late. It dropped in the past three months. Two months ago, the drop was especially sharp – 6.3%. A correction is likely now – a rise of 2.1%.
  3. Private Sector Credit: Wednesday, 1:30. This relatively solid indicator disappointed in the past three months, falling below expectations. The last publication was especially disappointing – the first drop since 2009. A small rise of 0.2% is expected now.
  4. AIG Manufacturing Index: Wednesday, 23:30. The Australian Industry Group provides has shown instability in its PMI-like figure. The recent figure was quite weak – 43.4 points, reflecting serious contraction.
  5. Chinese Manufacturing PMI: Thursday, 1:00. According to unofficial figures provided by HSBC, China’s manufacturing sector is already contracting. The official figure still points to weak growth. Australia’s main trade partner is expected to show stronger growth now, with the figure rising from 50.7 to 51.2 points.
  6. Retail Sales: Thursday, 1:30. Similar to other figures, also this important consumer indicator was negative recently. After a drop of 0.1% in June, a rise of 0.3% is predicted for July.
  7. Private Capital Expenditure: Thursday, 1:30. This quarterly figure has an equal weight to the retail sales figure released at the same time. Q1 has seen a nice expansion of investments – 3.4%. Expectations for Q2 are quite optimistic – an even stronger growth rate of 4.1%.
  8. Commodity Prices: Thursday, 6:30. Australia’s commodity oriented economy is dependent on changes in prices. On a year over year basis, prices have risen by 27.6%. Slower rises are expected now.

* All times are GMT.

AUD/USD Technical Analysis

Aussie/dollar began the week with a gap lower. From there, things eventually improved. The move higher was capped once again by the 1.06 line (discussed last week).

Technical levels, from top to bottom:

We start from 1.0920 which is distant resistance. It cushioned the fall of the pair in the past.  1.088 proved to be a strong line in recently, separating ranges. Its role is minor now.

1.0775 was a key resistance level before the surge, and the top border of long running range. A few recovery attempts failed to breach this strong line and it marked the beginning of the fall.  The round number of 1.07 was temporary support. It is a minor line.

The round number of 1.06 capped the pair nicely and is a new resistance line on the graph. 1.0530 managed to cap the pair before a stronger move, and is now weak support.

The 1.0420 line returns as support this time. It is another weak line. 1.0314 was a stepping stone on the way up at the beginning of the year, and worked well in the opposite direction.

Further below, the 2010 high of 1.0254 is support, and its not too far. The round number of 1.02 capped a range before the pair took off in the previous round.

1.0120 was a nice cushion during the recovery and is further support. Further minor support is at 1.0070.

I remain neutral on AUD/USD.

The Australian dollar continues to enjoy the current positive situation in Australia and hopes of American QE, but faces significant headwinds from the Chinese slowdown. The forces are currently balanced, but may turn against the Aussie. Also note the crash in gold, which doesn’t help the pair

Further reading: