The Aussie had another roller coaster week, ranging 500 pips. Lots of action! The upcoming week features important employment figures among other events. Here is an outlook for the Australian events, and an updated technical analysis for AUD/USD.
The Australian dollar fell to a one year month low against the greenback on global worries and some hints of a rate cut in the monthly rate decision. On the other hand, retail sales, building approvals and trade balance all provided upside surprises.
AUD/USD daily graph with support and resistance lines on it. Click to enlarge:
- ANZ Job Advertisements: Monday, 00:30. This large bank provides a measure of job advertisements in the media. This publication that comes before officials numbers, provides good guidance. Ads fell by 0.6% last month, and this was eventually reflected in weak employment data. Another small drop is likely now.
- NAB Business Confidence: Tuesday, 00:30. National Australia Bank surveys around 350 businesses to asses the current situation of the economy. Last month, it provided a very worrying sign: the index fell to -8, the worst since April 2009. The negative number means that the economy is deteriorating. A similar figure is likely now.
- Westpac Consumer Sentiment: Monday, 23:30. This Australian bank measures consumer confidence, and while the changes are large, this still has a strong impact. After the leap of 8.1% last month, a small drop is likely now.
- Home Loans: Wednesday, 00:30. The recent building approvals figure in Australia was quite positive, but it is a very volatile one. Changes in home loans are more stable and are no less important for the housing sector. After a weaker than expected rise of 1% last month, a drop is likely now.
- MI Inflation Expectations: Thursday, 00:00. The Melbourne Institute measures inflation using its tools on a monthly basis and fills the gap for the government, that releases these figures only once a quarter. Expectations dropped in the past two months under the 3% line and hit 2.8% last month. Another slide is expected now. A big drop will increase the pressure for a rate cut.
- Employment data: Thursday, 00:30. The Australian job market has turned negative in recent months. Australia is losing jobs, and the unemployment rate is on the rise. Another drop of around 10K is expected now, while the unemployment rate is likely to stay unchanged at 5.3%.Any bigger deterioration will push Glenn Stevens and his colleagues for a rate cut, sooner than later.
- Chinese Trade Balance: Thursday, 2:00. Australia’s main trade partner saw a surprising drop in its trade surplus, after two months of very strong numbers. If China lands, soft or hard, this has a strong impact on Australia. A surplus of around 20 billion is expected now.
* All times are GMT.
AUD/USD Technical Analysis
Aussie/dollar dropped sharply at the beginning of the week and hit a low of 0.9387 before recovering in a very impressing way. After recapturing the 0.9463 line (mentioned last week), the Aussie jumped and eventually closed much higher.
Technical levels from top to bottom:
We start from the first significant line above parity. 1.0120 was a nice cushion on a drop during July. The next line is obvious: AUD/USD parity. The very round number has strengthened in September after capping a recovery attempt. It temporarily held the pair before the downfall.
Below parity, 0.9930 is weak resistance after holding back in August. 0.9880 was a swing high in October and is another line of resistance.
The 0.98 line served as support early in the year, and serves as weak another weak line of resistance. The next round number of 0.97 was a swing low in March and also worked as support in September.
0.9622 was a fresh low in September and is immediate support right now. This was also a line of support back in September 2010. Lower, 0.9540 was a stepping stone on the way up back in the fall of 2010 and then provided critical support in November.
0.9460 capped the pair on the way up and then turned into support – it has the same role now. The fresh low under 0.94 makes this round number a strong support line.
0.93 – which was a clear gap line in September 2010 and is very important support on the way down. The last line for now is 0.9220, which was resistance more than a year ago.
I am neutral on AUD/USD.
While a rate cut is hanging above Australia and fundamentals are weakening, it could enjoy the pause in global doom and gloom, helped by the positive Non-Farm Payrolls report in the US, at least in the upcoming 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 to 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
- For the Swiss Franc, see the USD/CHF forecast.
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