AUD/USD Outlook January 23-27

The  Australian dollar  rose over 200 pips against the greenback,  ending  the week at the 1.0470  level. There are four indicators being released in the  upcoming week. Here is an outlook for the Australian events, and an updated technical analysis for AUD/USD.

Increased speculation about a Greek default  and  concerns about the eurozone  did not affect the aussie, as traders were busy snapping  up the Australian currency this week.

Updates: Australian PPI rose by only 0.3% on a quarterly level, half of the previous one. This didn’t stop the Aussie, which enjoyed the European optimism to jump and top out at around 1.0570 before dropping back under 1.05. Consumer prices remained unchanged in Australia in Q4. This increases the chances for a rate cut in Australia in February. Nevertheless, it was the fresh pessimism around Greece that sent the pair lower. The Aussie skyrocketed  following the policy change in the US: Bernanke  extended the pledge for low rates until late 2014  and didn’t rule out QE3. AUD/USD is close to 1.07.

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

1. PPI:  Monday, 00:30. This inflation index is published only once every quarter, making it very significant.  The index has been falling since April,  recording an increase of 0.6% in Q3.  The forecast for Q4 is a smaller increase of only 0.4%.  If the markets are correct in their forecast, this would be the third straight drop for the index, a trend which is bound to worry the markets.
2. CB Leading Index:  Monday,23:00. This composite index is based on seven important economic indicators. The index showed a nice increase of 0.6%, its best showing since April.
3. MI Leading Index:  Tuesday,  23:30. This  composite  index is based on nine economic indicators.  The  November reading of  a 0.3% drop was its worst since April 2009.  Last month, however, the index bounced back, with an increase of 0.1%.  Will the index continue to stay in positive territory?
4. CPI:  Wednesday, 00:30. Like the PPI, this main inflation release has been on a downward trend.  The markets are calling for a minimal  increase this month of only 0.2%. The trimmed CPI indicates a similar trend of lower  little inflation.

* All the times are GMT.

AUD/USD Technical Analysis

AUD/USD  opened the week at 1.0279. After dropping to a low of 1.0254, the pair  climbed impressively, breaking resistance at the 1.04 level (discussed last week)  on its way to reaching a high of 1.0489.   The pair ended the week at 1.0469.

Technical levels from top to bottom:

We begin with the round number of 1.0733, which  is strong resistance.  This is followed by strong resistance  at 1.0660.  Next is the round number of  1.05, which  served as support in May and  June and is now in a resistance role.  It could be tested on a further upswing by the pair.  Below is 1.04, which  had served as strong resistance since November 2011.  The round number of 1.03 has been  tested  throughout  January, and now finds itself  providing weak support. Next, 1.0250 is  also acting as weak support  for the pair.

This is  followed  by 1.02, which is also providing weak support. Below, 1.0080 is  providing support, protecting the all important parity level.  Further, strong support is seen at  the levels of    0.99 and 0.9850. Next, the line of  0.9660 is an important  support  level, which  provided strong support throughout 2011.  Finally, the round number of 0.95, which was breached  only once in 2011, is providing strong support to the pair.

I am  neutral  on AUD/USD

The Aussie had a brilliant week against its US counterpart,  with the pair now eyeing  the important level of 1.05, a level  not  reached since October 2011. However,  Australian employment figures were awful last month, and new  motor vehicle  sales were down, signalling that consumer confidence is weak. Will the aussie rally continue, or will traders once again flock to the US dollar as a safe haven?

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