AUD/USD Outlook – Feb. 28 – Mar. 4

After moving higher on commodity prices and dollar weakness, Aussie traders await an extremely busy week: a rate decision and GDP are the highlights among 13 indicators. Here’s an outlook for the Australian events and an updated technical analysis for AUD/USD.

Not only oil is on the rise – also other commodities are moving higher, aiding the export-oriented Australian economy. Will this continue? A lot depends on the outcome of the Libyan civil war. Let’s start:

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

1. MI Inflation Gauge: Sunday, 23:30. Since the government publishes official inflation figures only once per quarter, the Melbourne Institute’s publication is useful for filling the gap. They’ve showed that prices rose by 0.4% last month. The rise in prices is expected to accelerate this time.
2. Private Sector Credit: Monday, 00:30. More credit means more money pumped into the economy, making this early indicator significant. Following a rise of 0.2% last month, credit is predicted to expand by 0.3% this time.
3. AIG Manufacturing Index: Monday, 22:30. The Australian Industry Group has shown that manufacturing is still squeezing – this PMI-like figure is still under the critical 50 point mark that separates contraction from growth. The outcome is expected to be higher than last month’s 46.7 points, but still under 50.
4. Retail Sales: Tuesday, 00:30. This important consumer-related figure has risen very modestly last month, only 0.2%. It’s now expected to be slightly better, 0.3%. A rise of 1% will boost the Aussie.
5. Current Account: Tuesday, 00:30. Somewhat overshadowed by the retail sales number, Australia’s current account is likely to show a smaller deficit than the previous period – 6.9 instead of 7.8 billion. This estimation is base on the trade balance numbers that have shown nice surpluses. Current account includes the goods in the trade balance figure + services and cash.
6. Chinese Manufacturing PMI: Tuesday, 1:00. Australia’s biggest trade partner is undergoing an attempt to cool down the economy, and prevent overheating. This important gauge of activity is likely to drop from 52.9 to 52.2 points – still growth, but a slower one.
7. Rate decision: Tuesday, 03:30. Glenn Stevens was very optimistic about the Australian economy in recent appearances, including the last rate statement. Nevertheless, his RBA isn’t expected to lift the already high interest rate. The Australian Cash Rate is expected to remain unchanged at 4.75%. The focus will be on the rate statement. A positive tone or fear from inflation will boost the Aussie, while warnings will weaken it.
8. Commodity Prices: Tuesday, 5:30. Australia’s economy is very dependent on the prices of commodities, as it’s a big exporter of those. This year-over-year gauge has shown a rise of 48.7% and will likely be the same now.
9. HIA New Home Sales: Wednesday. The Housing Industry Association has shown drops in new houses in the past two months, with. Another small drop is expected now, probably less than 1%, as previously seen.
10. GDP: Wednesday, 00:30. After a great first half, the Australian growth in Q3 was very disappointing – a rise of only 0.2%. The growth rate is expected to rise to 0.6% this time, but the impact of the floods in Queensland may lower it. The Aussie will shake on any result.
11. AIG Services Index: Wednesday, 22:30. AIG follows up on the release from Monday with the figure for the services sector. Also here, the result is negative, showing contraction in this sector as well. It’s expected to rise from 45.5 points, but still remain under 50.
12. Trade Balance: Thursday, 00:30. The fresh trade balance figure for January is likely to show a squeeze in the surplus, after a few months of growth. The surplus is expected to drop from 1.98 to 1.56 billion.
13. Building Approvals: Thursday, 00:30. The number of approvals is extremely volatile – jumping and diving every month. Nevertheless, it always has a strong impact on the currency. Following a leap of 8.7%, the number of approvals is expected to drop by 3.1%.

AUD/USD Technical Analysis

The Australian dollar struggled with parity at the beginning of the week, but after it managed to conquer this line, it continue rising and stopped just short of the 1.0180 line (discussed last week).

Looking down, the first line of support is 1.0080, which was resistance for quite some time, and now turns into support after having this role just now. It isn’t a strong line anymore. It’s followed by the obvious line of parity which is important once again.

Below, support is found at 0.9940, which was a bottom in recent weeks. Further below, minor support is found at 0.9866, which was a stepping stone before the recent move.

Lower, 0.98, the lowest level in 2011 so far. It prevented further falls.  It’s followed by 0.9724, that  was a tough line beforehand and is minor support now.

0.9660 worked in both directions, and especially as a cushion back in October.  Further below, 0.9540 which was the bottom in November and also in September  serves as important support. There are further lines below, but they’re too far at the moment.

Looking up, there aren’t too many resistance lines. 1.0180 was the top border of  a range in November and prevented leaps just now. It serves as immediate resistance.

Above, the multi-year high of 1.0254, reached at the end of 2010 is he next resistance line. Beyond, it’s unchartered territory.

I remain bullish on AUD/USD.

The spike in commodity prices joined the strength of the Australian economy. This very busy week is likely to see very choppy trading, and the Aussie is likely to drift higher.

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.