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AUD/USD  dropped sharply last week, closing the week at 1.0575.  The  upcoming week  has six  releases.  Here is an outlook for the Australian events, and an updated technical analysis for AUD/USD.

US non-farm payrolls posted strong numbers in January and February, helping the dollar rally.

Updates: AUD/USD continues to drop, trading at 1.0509. Chinese Trade Balance plunged to -31.5B, its worst showing since 1989. The figures are reflective of decreased exports to Europe to the debt crisis. Home loans dropped by 1.2%, a ten-month low. NAB Business Confidence plunged to 1, its lowest level in five months. AUD/USD dropped under 1.05, trading at 1.0482. Westpac Consumer Sentiment plunged by 5%. Housing Starts were down by 6.9%, the third straight drop by the  quarterly index. AUD/USD climbed back over 1.05, trading at 1.0517. MI Inflation Expectations was up slightly, at 2.7%. New Motor Vehicle Sales disappointed, coming in at a flat 0.0%.

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

  1. Home Loans:  Tuesday, oo:30.  Home  Loans was up 2.3% in  February, a seven-month high. The indicator is on an upswing, and another strong reading in March would be bullish for the aussie.
  2. NAB Business Confidence:  Tuesday,  00:30. This indicator has been in positive territory since  last November, and the  February reading was up to 4,  the best performance since June 2011.  Will the indicator continue to post strong figures this month?
  3. Westpac Consumer Sentiment:  Tuesday, 23:30.  Consumer  sentiment is also on an upward trend. The February reading came in at a healthy 4.2%, the best figure since November 2011.  Another strong figure in March would signal sustained consumer confidence, a critical component for economic growth.
  4. Housing Starts: Wednesday, 00:30.  Housing starts are released quarterly,  and the market forecasts are often well off the mark. The indicator plunged in February by  6.8%, shocking  the markets, which had forecast a small drop of just 1%.  Will the indicator rebound with a strong reading in March?
  5. MI Inflation Expectations: Thursday, 00:00. This indicator is based on the inflation rate  expected by consumers. The February reading came in at 2.5%.
  6. New Motor Vehicle Sales: Thursday, 00:30.  New  Motor Vehicle Sales is an important indicator of consumer spending. The  February  indicator rose 1.3%,  the first  positive reading since November, and a five-month high.
*All times are GMT.

AUD/USD Technical Analysis

AUD/USD  opened at 1.0720.  After  rising slightly to 1.0739,  the pair dropped  all the way to 1.0509, as the support line of 1.05 (discussed last week) held firm. The pair  recovered somewhat,    closing at 1.0575.

Technical levels from top to bottom:

We begin with the resistance line of 1.1090, which was last tested in August of 2011. Next is 1.1009, just above the psychologically important level of 1.10. This  is  followed by strong resistance at 1.0884. Below, the round  number of 1.08 is providing resistance to the pair. The next line of resistance is at 1.0724.   This is followed by 1.0650, which  was a support line just last week, and is now in a resistance role.   Next, 1.0585 was breached by the surging dollar, and is now a weak resistance line. It could  fall on an upward swing by the pair.

AUD/USD dropped  as low as  1.0509, but was unable to break through the important level at 1.05. It is followed by the 1.0383 line, which  has acted as a support level since January. The next support line for now is 1.0320. Below, is the support line of 1.0250. This is  followed  by 1.02, a strong support line. Below, 1.0080 is  providing support, protecting the all-important parity level.

I am  neutral  on AUD/USD.

AUD/USD moved downwards this week, but traders should keep in mind that the pair has made strong gains in 2012. If the Australian economic  indicators post strong numbers, we could see the aussie rebound.

Further reading: