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After a superb 2010, the Aussie starts 2011 with quite a few indicators. Here’s an outlook for the Australian events, and an updated technical analysis for AUD/USD, which left parity well behind.

New multi-year highs were reached in the last week of 2010, as the markets disregarded the Chinese rate hike and rose on risk appetite. This weekend, we got a weak Chinese manufacturing PMI. Will this continue? Let’s start:

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

aud to usd forecast january 3-7 2011

  1. HIA New Home Sales: Publication time unknown at the moment. The Housing Industry Association has shown instability in house prices in recent months, with a rise of 2.4% last month following a drop of 1.7% beforehand. A small rise is expected now.
  2. AIG Construction Index: Publication time unknown at the moment.  The Australian Industry Group’s PMI-like figure showed weakness in the construction sector – the score of 42.2 points is quite far from 50 points – the balance between growth and contraction. A rise is expected now.
  3. AIG Manufacturing Index: Monday, 22:30. The  manufacturing sector   was rather weak in recent months – manufacturing has been in contraction mode in the past three months, with the figure being under the critical 50 point mark. An improvement is expected from last month’s 47.6 points.
  4. Commodity Prices: Tuesday, 5:30. Australia is dependent on exports of iron ore and coal, among other commodities, so this indicator is very important. The year-over-year number stood on +44.4% last month. A higher figure is expected now.
  5. AIG Services Index:  Wednesday, 22:30. Also the services sector has been below 50 points last month, though it has been in positive territory just two months ago. A rise from 46.2 towards 50 is due this time.
  6. Building Approvals: Thursday, 00:30. This is a very important indicator for Australia, especially as the talks of a housing bubble are mounting. A surprising leap of 9.3% was recorded last month, after a few months of sharp drops. A much smaller rise is expected now.

* All times are GMT.

AUD/USD Technical Analysis

After a rough start, with a fall under parity, AUD/USD climbed up, broke the 1.0080 line (mentioned last week) and eventually crossed the 1.0180 line to close at 1.0225.

AUD/USD is now above the previous historic highs of 1.0180, and sees only 1.03 as the next resistance level, in uncharted territory.

1.0180 now serves as immediate support. It was the peak at the beginning of November. Below, 1.0080 provides further support, after working as resistance just now and providing support two months ago.

Lower, AUD to USD parity remains a strong support line. Below, 0.9917 was a line of resistance on the way up, and now provides minor support.

0.9840 worked as support for the pair a few weeks ago, and also was a pivotal line beforehand. It provides immediate support. Below,  0.9724 worked as support several times in recent months and is the next line of support.

Lower, 0.9660 is now only a minor support, but it’s still significant. Below, 0.9540 proved to be a very strong line, being a swing low a few months ago, and also two weeks ago.

Even lower, 0.9465 provided support for the pair when it struggled on the way up, and is already stronger support.  The next lines are close – 0.9366 was a peak back in April, and 0.9327 capped the pair lots of times beforehand.

Uptrend channel: In the past two weeks, AUD/USD has been trading in an uptrend channel, also marked in the graph. It’s important to watch this channel as well, especially uptrend support.

I am neutral on AUD/USD.

It’s the second week in a row which begins with bad news from China – this time an indicator of slower growth. On the other hand, Australian fundamentals continue to support a stronger currency. A clearer direction will be available when all traders return from their holidays.

Further reading: