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AUD/USD  surged last week, as the pair picked up over two cents.  The pair  closed at 0.9675. This week’s highlight is  CPI.  Here is an outlook of the events and an updated technical analysis for AUD/USD.

The Australian dollar took advantage as the US  dollar sagged last week, as initial optimism  over the debt deal in  Congress faded.    Australian releases were not particularly sharp, but the Aussie got a boost as RBA minutes indicated that the central bank was unlikely to lower rates before the end of 2013.

AUD/USD graph with support and resistance lines on it. Click to enlarge:    AUD USD Outlook Oct. 21-25th

  1. CB Leading Index: Monday, 23:00. This important index is based on 7 economic indicators. The index has been subdued in 2013, and posted a gain of 0.3% last month. The markets will be hoping for a stronger gain for September.
  2. CPI:  Wednesday, 00:30.  This is the key event of the week. The index  released each quarter,  has posted two straight gains of 0.4%, but the markets are expecting a jump to 0.8% in Q3. Will the indicator match or beat this rosy prediction?
  3. Trimmed Mean CPI:  Wednesday, 00:30. Trimmed Mean CPI excludes the most volatile components of CPI. The index rose to 0.5% in Q2, and the markets are expecting the upward trend to continue, with an estimate of 0.7% for Q3.
  4. Philip Lowe:  Tuesday, 3:00. Lowe will address a financial conference in Melbourne. Analysts will be looking for clues as to the RBA’s future monetary policy, and a hawkish speech is bullish for the Australian dollar.

AUD/USD Technical Analysis

AUD/USD  started the week at 0.9446 and  dropped to a low  of 0.9434. The pair then  climbed sharply,  touching a high  of 0.9677, breaking past resistance at 0.967o (discussed  last week). The pair closed the week at 0.9675.

Live chart of AUD/USD:   [do action=”tradingviews” pair=”AUDUSD” interval=”60″/]


Technical lines from top to bottom:      

With the Australian dollar posting strong gains, we begin at higher ground:

We start with resistance at 1.0093. This line was last breached in mid-May, when the Aussie was in the midst of a sharp downturn.

Parity is a key resistance line. This psychologically significant level has remained intact since May.

Next is resistance at 0.9961. This is followed by resistance at 0.9828.

The line of 0.9751  provided  key resistance in early June and has held firm since that time.

0.9670 was a cap for the pair in late May and has reverted to a support line, following this week’s strong gains by the Aussie.

0.9556 had provided resistance since mid-June, but also finds itself in a support role.

0.9428 held firm as the pair lost ground early in the week. It has some breathing room with the pair trading above the 0.96 line.

0.9283  saw  a lot of action in  the months of June and  July, alternating between resistance and support roles. It is providing the pair with strong support.

0.9180 is the next support level. This is followed by the  round number of 0.9000, our final line  for now.  This psychologically important  level was breached in early September, when the Australian dollar started a strong rally which saw it break past the 0.95 line.

 I am neutral on AUD/USD.

The US dollar showed broad weakness and the Australian dollar took full advantage, posting sharp gains.  Will the greenback rebound this week? Much will depend on the release of Non-Farm Payrolls, which will be released on Tuesday. This key indicator was suspended during the shutdown, so it  could have a strong impact on the movement of AUD/USD.