After some choppy trading, inflation figures are the highlight of the upcoming week. Has global food inflation reached Australia? Here’s an outlook for the Australian events and an updated technical analysis for AUD/USD.
Chinese figures were rather good in the past week – GDP rose by 9.8% in Q4, better than expected after hints of slow growth, and inflation still isn’t out of control, extreme tightening measures are necessary, at least not yet. Will the Aussie enjoy this?
AUD/USD daily chart with support and resistance lines marked. Click to enlarge:
- NAB Quarterly Business Confidence: Publication time unknown at the moment. National Australia Bank has shown a recovery in business confidence last month. Their survey of 1000 businesses rose to 9 points from 3 two months ago. It’s expected to dip back down now.
- PPI: Monday, 00:30. Producer prices are a good warm up for the consumer prices later in the week. The figure is for the whole fourth quarter. After a surprising rise of 1.3% last month, double the early expectations, a rise of only 0.5% is predicted now. Given the global food inflation, prices could be rise faster.
- CB Leading Index: Monday, 23:00. This composite index of 7 economic indicators recovered last month and rose by 0.6%. While most of the indicators have already been released, this overall figure tends to shake the Aussie.
- CPI: Tuesday, 00:30. Has inflation reached Australia? In the first three quarters of 2010, prices have risen at steady pace. Last quarter’s 0.7% rise was slightly below expectations. A 0.8% rise is predicted now, but given the food inflation which is felt by customers, a rise of over 1% won’t be a big surprise. Also note the Trimmed Mean CPI (Core CPI) in other countries), which is expected to rise by 0.8%.
- MI Leading Index: Wednesday, 23:30. Also the Melbourne Institute has its leading index, but this one is wider, and based on 9 indicators. The same trend has been seen here – a recovery last month after a few weak ones. A similar 0.3% rise is expected now.
* All times are GMT
AUD/USD Technical Analysis
The Australian dollar moved above parity at the beginning of the week, but this move was short-lived. It bounced off the 1.0080 line (mentioned last week), before falling and closing at 0.9897, under the 0.9915 line.
Looking down, support is only found at 0.98 – a line which proved to be strong in recent weeks. It’s followed by 0.9724, that was a tough line beforehand.
Further below, 0.9660 is the next line of support – it worked in both directions, and especially as a cushion back in October. Lower, 0.9540 was the bottom in November and also in September, and serves as important support.
Even lower, 0.9460 was a stepping stone on the way. The next two lines are neighbors – 0.9366 and 0.9327 worked as resistance lines many times in the past. The last line on the downside is 0.9220, a peak seen many months ago.
Looking up, immediate resistance is at the same place – 0.9915 – it worked as such just on Friday. AUD USD parity is the obvious resistance line above.
Beyond parity, 1.0080 proved to be a significant line for another week. 1.0180 is the top border and is another line of resistance. The last line on the upside it 1.0250 – the multi-year high.
I remain neutral on AUD/USD.
Opposite forces are shaking the Australian dollar in both directions – Chinese growth, strong Australian job market and the high interest rate in Australia help the Aussie, while the fear of Chinese tightening measures, and the impact of the Queensland floods weigh on it. This balance is likely to continue for another week.
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.
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