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After a great week, another busy one expects Aussie traders. The RBA’s rate decision and employment figures are the highlights. Here’s an outlook for Australian events and an updated technical analysis for AUD/USD.

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

aud usd forecast

The Aussie enjoyed lots of good figures, with the Q2 GDP growth of 1.2% being a great positive surprise. The better-than-expected retail sales figure and especially building approvals, showed that also in Q3, the Australian economy is warming up once again. Will this lead to a renewal of rate hikes?

  1. MI Inflation Gauge: Published on Monday at 12:30 GMT. The Melbourne Institute’s inflation gauge fills in for the government, that publishes an official inflation figure only once per quarter. According to MI, inflation slowed down from 0.5% three months ago, down to 0.1% last month. A similar 0.1% rise is expected this time.
  2. ANZ Job Advertisements: Published on Monday at 1:30 GMT. The amount of jobs published in the media serves as a good indicator for the official employment figures released 3 days later. Last month saw a smaller growth in ads, only 1.3%, and indeed, the gain in jobs was slower than previous months. This time, the rise in ads is expected to slightly stronger.
  3. AIG Construction Index: Published on Monday at 23:30 GMT. The Australia Industry Group showed that the construction sector is slowing down, even contracting in the past two months. The index was under the critical 50 point mark, and this shows an economic squeeze. This goes hand in hand with the slowdown in other housing sector figures – a result of the rate hikes. It’s expected to recover, but remain under 50 points this time.
  4. Rate decision: Published on Tuesday at 4:30 GMT. 4 months have passed since the last rate hike, the sixth since the financial crisis. The hikes took their toll on the economy, and especially on real estate, so Glenn Stevens and his colleagues at the RBA decided to pause on recent months. Also now, the Cash Rate is expected to remain unchanged at 4.50%. The focus will be on the accompanying statement which will hint about future moves.
  5. Home Loans: Published on Wednesday at 1:30 GMT. This important housing sector figure always rocks the Aussie. After a sharp fall of 3.9% last month and many bad months beforehand as well, the number of loans is expected to grow by 1.1% this time, boosting the Aussie.
  6. Employment data: Published on Thursday at 1:30 GMT. After months of excellent figures,  last month’s employment numbers were somewhat mixed. Employment Change rose by 23.5K, slightly better than expected, but the unemployment rate jumped to 5.3%, which was a quite a disappointment. A similar gain in jobs, 25.3K is expected now. The unemployment is expected to fall back down to 5.2%. Any result will rock the Aussie.
  7. Guy Debelle talks: Starts speaking on Thursday at 3:00 GMT. RBA deputy governor Dr. Guy Debelle might say more about the fresh rate decision, and add prospects about the future. It’s important to note that in a speech last week, Debelle didn’t mention anything related to monetary policy.
  8. Chinese Trade Balance: Published during Friday. Australia’s main trade partner has a strong impact on the Aussie. This time, the trade balance of the world’s second largest economy will be closely watched. This figure is also sensitive for the value of the Chinese yuan, which is closely monitored by the US. China’s surplus is expected to squeeze from 28.7 to 26.9 billion.

AUD/USD Technical Analysis

The Australian dollar dropped gradually at the beginning of the week, and found support at the 0.8870 line (mentioned in last week’s outlook). It then made a sharp recovery, crossing 0.90 easily, struggling with 0.9080 and finally jumping above 0.9135 to close at 0.9143.

The Aussie is now bound between the 0.9135 line which worked as support back in April, and 0.9220, which was a support line in March and also capped the Aussie at the beginning of August.

Looking down, 0.9080 is the next support line. It was a double top in July and the Aussie leaped above it during a weekend. Lower, the round number of 0.90 provides support. This psychological number was also a swing low in March.

The 0.8870 line was tested in the past week and also capped the pair twice in recent months. It now serves as strong support. 0.8735 was a low point in December 2009 and also in July – minor support now.

Lower, 0.8567 was a support line back in 2009, and also worked as resistance in May. Below, 0.8316 was a double bottom in July and provides strong support. The final line is the year-to-date low 0f 0.8066.

Looking up above 0.9220, the next line is a very strong one – 0.9327. It capped the Aussie many times in the past year. A break above this line will send the pair towards immediate resistance at 0.9366, which was a stubborn line in April.

The 2009 high of 0.9405 is the next resistance line, and it’s followed by 0.95, which was last reached only in 2008.

I remain bullish on the Aussie.

The past week’s strong GDP figures, and a good outcome from the job figures on this busy Australian week, should provide the basis for further gains.

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