AUD/USD Outlook – February 1-5 2010

Looking for the latest outlook, for the current week? Check out the section: AUD/USD Forecast

The Aussie had a disappointing week, surrendering to the greenback’s strength. The upcoming features a probable fourth consecutive rate hike that might lift the Aussie. There are many more indicators. Here’s an outlook for the Australian dollar, and an updated technical analysis for AUD/USD.

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

This week is loaded with Australian figures, some delayed from previous weeks. The high interest rate will be in the limelight at the beginning of the week, but will later be overshadowed by more figures. Let’s start the review. The technical analysis will follow:

1. NAB Quarterly Business Confidence: Publication time is unknown at the moment. This has been delayed from last week. In addition to the monthly release, National Bank Australia publishes a quarterly number as well. After 6 consecutive quarters of negative numbers, meaning worsening conditions, this survey of 1000 businesses was positive last quarter, scoring 16 points. A similar number is expected now
2. HIA New Home Sales: Publication time is unknown at the moment. The Housing Industry Association has shown a small rise of 0.3% in the number of sales last month, after two months of big drops. Another small rise is predicted this time.
3. AIG Manufacturing Index: Published on Sunday at 22:30 GMT. 200 manufacturers are surveyed by the Australian Industry Group about their  expectations for future conditions. This index slipped below 50 last month, hitting a score of 48.5. This indicates that the manufacturing sector is contracting. It happened after 4 positive months. It’s predicted to rise this time.
4. MI Inflation Gauge: Published on Sunday at 23:30 GMT. After seeing a rather strong CPI in Q4, the Melbourne Institute supplies an unofficial peek in into the first month of 2010. The past two month saw a steady rise of 0.3% in prices. A similar rise is predicted this time.
5. ANZ Job Advertisements: Published on Monday at 00:30 GMT. Similar to the strong Australian job market, this unofficial release shows a rise in jobs. They measure the number of jobs advertised on newspapers, and printed a rise of 6% this time. Another rise is predicted this time, but it will probably be more modest.
6. HPI: Published on Monday at 00:30 GMT. This official house price index showed strong rises in prices in the past two months – 4.2% every month. A rise in house prices also impacts inflation and the upcoming rate decision. HPI is predicted to rise by 3.7% this time.
7. Commodity Prices: Published on Monday at 5:30 GMT. Australia’s commodity exports are vital to the economy. This year over year indicator still shows negative numbers, but they have squeezed. Last month saw a y/y drop of 16.6%. This month will probably be closer to zero.
8. NAB Business Confidence: Published on Tuesday at 00:30 GMT. The monthly survey of 350 businesses has shown a rise in confidence, with a score of 19 points last time, the highest in many years. This positive number means optimism which is expected to continue, but it will probably not reach new highs.
9. Rate decision: Published on Tuesday at 3:30 GMT. Australia stands out with a high interest rate of 3.75%. The current rate comes after 3 consecutive 0.25% rate hikes. Hlenn Stevens’ RBA will probably make a fourth hike to 4% in this decision. Inflation, as seen in last week’s quarterly CPI is OK, and the job market sure is hot, with last month’s unemployment rate falling to 5.5%. All this leads to a probably rise in the Cash Rate. The accompanying RBA Rate Statement will hint about future policy and may also move the Aussie.
10. AIG Services Index: Published on Tuesday at 22:30 GMT. The complementary figure for last the manufacturing index printed 50 points last month – the pivotal point between expansion and contraction. This came after 2 months of higher numbers. A score above 50 is predicted this time as well.
11. Trade Balance: Published on Wednesday at 22:30 GMT. Since May 2009, Australia has seen a deficit in the balance of imported and exported goods. Last month, this deficit squeezed to 1.7 billion. But now it’s expected to expand again to 2.36 billion.
12. Retail Sales: Published on Thursday at 00:30. This all-important consumer figure isn’t very stable. It changes from expansion to contraction every month or two. A stronger than expected rise was seen last month – 1.4%. This helped the Aussie. A more modest rise is predicted this time – 9,3%.
13. Building Approvals: Published on Thursday at 00:30, and it’s overshadowed by the retail sales release. Also this isn’t a stable indicator, but it has been mostly positive in recent months. The number of building approvals, which impacts the whole economy, rose by 5.9% last month. They are expected to remain unchanged this time.
14. AIG Construction Index: Published on Thursday at 22:30 GMT. The last PMI-like figure from AIG is the weakest. It has been under the 50 mark during most of 2009, with only two months above the water. Last month it got close to 50, but from the bottom – 49.3 points. It’s predicted to rise above 50 this time.
15. RBA Monetary Policy Statement: Published on Friday at 00:30 GMT. Almost three days after the rate decision, the RBA provides it’s own quarterly view about the economy. The timing isn’t always this close. The report will sure impact the Aussie and supply a strong ending to a very busy week.

AUD/USD Technical Analysis

The Aussie traded in a range between the 0.9090 resistance line and the important 0.8950 support line. After an initial false breakdown, Friday’s dollar storm was too strong for the Aussie which closed the week at 0.8836.

The lines haven’t changed since last week’s outlook. 0.8950 turns into an initial and strong resistance line. Above this line, the aforementioned 0.9090 line is another line of resistance.

Further above, 0.9170 served as a support line for a short time and provides an additional minor support line. 0.9322 is a very strong resistance line, being tested many times.

Looking below, 0.8735 was the bottom during the previous breach of 0.8950 (December) and now supplies immediate support. A stronger support line appears at 0.8567, a place where the Aussie pauses to rest before going up.

Even lower, 0.8477 is a very strong support line, serving as long-standing resistance line during 2009.

I am neutral on AUD/USD.

Despite the recent losses and China’s tightening measures, Australia has a strong economy, seen in a much better job market than the American one. A rate hike should keep it stable.

Further reading:

• 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 GBP/USD, look into the  British Pound forecast.
• For USD/CAD, check out the  Canadian dollar forecast.

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