The Aussie couldn’t avoid the European storm and lost a lot of ground. The upcoming week is very busy in terms of indicators – no less than 13 are published in Australia, with GDP being the highlight. Here’s an outlook for these events and an updated technical analysis for AUD/USD.
AUD/USD daily chart with support and resistance lines marked. Click to enlarge:
Friday was a very bad day for the Aussie, as Glenn Stevens’ dovish comments joined more bad news from Europe, and this ended in a loss of critical support. Will it recover now? Let’s start:
- HIA New Home Sales: Publication time unknown at the moment. The Housing Industry Association has shown that sales of news homes finally grew last month, by 0.6%, after many months of falls. Another rise is expected now.
- Glenn Stevens talks: Monday, 7:30. In a recent appearance in parliament, the head of the RBA sounded very dovish, hinting that it will take a long time before new rate hikes will be decided upon. This was unusual for the usually dovish governor. Will he repeat this stance in Melbourne?
- Guy Debelle talks: Tuesday, 00:15. Stevens’ assistant, Dr. Debelle will speak in Sydney and might shed some light about his opinion on the economy and the interest rates. Previous appearances moved the Aussie.
- Building Approvals: Tuesday, 00:30. In the past six months, building approvals have significantly squeezed, a result of rate hikes. This raised questions if there’s a housing bubble in Australia. We’re now expecting a recovery – a rise of 1.6% after a 6.6% fall.
- Private Sector Credit: Tuesday, 00:30. More credit means more economic activity. We’ve seen slow growth recently, around 0.1%. Growth is expected to pick up with a 0.2% this time.
- Current Account: Tuesday, 00:30. Although released after the related trade balance figure (which counts only goods), this quarterly number is of importance. After a relatively small deficit of 5.6 billion in Q2, we’re now expecting a wider one – 6.4 billion.
- AIG Manufacturing Index: Tuesday, 22:30. The Australia Industry Group’s PMI-like figure has shown that manufacturing almost stalled last month, with a score of 49.4, very close to the pivotal 50 point mark that separates growth and contraction. It’s now predicted to edge above 50.
- GDP: Wednesday, 00:30. Australia enjoyed strong growth in Q2, 1.2%, mostly due to Chinese growth. The tables have probably turned in Q3, with a growth rate of only 0.5%. Any result will rock the Aussie in this very important release.
- Chinese Manufacturing PMI: Wednesday, 1:00. China is Australia’s main trade partner, and as aforementioned, it relies on China for the strong growth. The purchasing managers index is expected to rise from 54.7 to 54.9 in China.
- Commodity Prices: Wednesday, 5:30. Prices of commodities have a strong impact on Australia, that exports iron ore, coal and more. This year-over-year figure stood on +46% last month, and it’s expected to remain at this level now as well.
- Trade Balance: Thursday, 00:30. After a significant squeeze last month, Australia’s trade balance is expected to rise back towards previous levels – from 1.76 to 2.13 billion. The figure is for the month of October. This is also related to China of course.
- Retail Sales: Thursday, 00:30. Although somewhat overshadowed by trade balance, this important consumer indicator always moves the currency. After two months of relatively slow growth – 0.3% each time, growth is expected to edge up and rise by 0.4% this time.
- AIG Services Index: Thursday, 22:30. Contrary to the figure from Tuesday, AIG showed a positive number for the services sector – 50.7, above the crucial 50 point mark. A small rise is expected now.
AUD/USD Technical Analysis
The Aussie quickly had a good start to the week, but fell afterwards. It first ranged between 0.9724 and 0.9863 but finished badly, with a fall under the critical 0.9660 line (mentioned last week), to close at 0.9640.
0.9660 now turns into immediate resistance, after working as support during October and November. Above, 0.9724 served as support in recent weeks and is now another line of resistance.
Higher, 0.9863 was a pivotal line in the past few weeks and serves as a minor resistance line. 0.9917 was a peak on the way up, and served as resistance just in the past week. Higher up the road, AUD/USD parity is naturally the next line of resistance.
Above parity, 1.0080 temporarily worked as support when the pair was very high, and the ultimate line is the peak of 1.0180.
Looking down, 0.9540 was a swing low in October and is now a minor line of support. Below, 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. The last line for now is 0.9220 which was a high point in the summer.
I remain bullish on AUD/USD.
Despite the blow from Europe, Australian fundamentals are still very strong: an excellent job market, a high interest rate and a sound banking system.
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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