Search ForexCrunch

AUD/USD  weakened  last week,  losing close to one cent.  The pair  closed the week at 0.9314. It’s a busy week, highlighted by some key releases including the RBA Cash Rate.  Here is an outlook of the events and an updated technical analysis for AUD/USD.

It was a very quiet week for Australian releases, with the highlight being Flash Manufacturing PMI. Although the  index improved, the Aussie couldn’t take advantage.  In the US, Unemployment Claims looked sharp, but key manufacturing and housing data disappointed the markets.

AUD/USD graph with support and resistance lines on it. Click to enlarge:   AUD USD Outlook Sep. 30- Oct. 4th

  1. MI Inflation Gauge:  Monday, 00:30.  This  indicator helps analysts  track inflation on a monthly basis, as  CPI is only released each quarter. The indicator posted a weak gain of 0.1% in July. The markets are hoping  for some improvement in the  August release.
  2. Private Sector Credit:  Monday, 1:30. Private Sector Credit is an important gauge of consumer and business spending, as an increase in borrowing should translate into increased spending, which is critical for economic growth. The indicator has posted gains of 0.4% in the past two releases, and an identical figure is the estimate for the August release.
  3. AIG Manufacturing Index:  Monday, 23:30. The index continues to point to  contraction  in the manufacturing sector, as the indicator has not been above the 50-point level since  January 2012. However, the index did  improve in  the July  release, climbing to 46.4 points. Will  the indicator continue to  climb towards the 50 level?
  4. Chinese Manufacturing PMI: Tuesday, 1:00. This index rose to 51.o points in August, its best reading since April 2012. The markets are expecting another strong release, with an estimate of 51.6 points. The Aussie is sensitive to key Chinese data, as China is Australia’s number one trading partner.
  5. Retail Sales:  Tuesday, 1:30. This key consumer spending indicator has posted weak reading recently. The August release came in at 0.1%, short of the estimate of 0.4%. The estimate for September stands at 0.3%.
  6. RBA Cash Rate:  Tuesday, 4:30. The RBA has stated on more than one occasion that the door is not closed to future rate reductions, but none is expected in the upcoming decision, which will be announced in a Rate Statement. The rate is expected to remain at 2.50%.
  7. Commodity Prices:  Tuesday, 6:30. With the global slowdown not showing any signs of dramatic improvement, Commodity Prices continue top point to weak demand overseas for Australian raw products. The indicator posted another sharp decline in August of -7.3%. The markets are not expecting a significant change in the upcoming release.
  8. HIA New Home Sales:  Wednesday, Tentative. This indicator is an important gauge of activity in the housing market as well as consumer spending. The indicator posted a sharp decline of -4.7%, its worst showing in five months. Will the indicator rebound in the September release?
  9. Building Approvals:  Wednesday, 1:30. Building Approvals tends to fluctuate sharply, making accurate market forecasts a tricky task. The indicator shot up 10.8% in August, crushing the estimate of 4.1%. The markets are bracing for a weak reading in September, with an estimate of -0.7%.
  10. Trade Balance:  Wednesday, 1:30. Australia has been recording modest trade surpluses in recent releases, but the August release disappointed, posting a deficit of -$0.77 billion. Another deficit is anticipated in September, with a forecast of -$0.45 billion.
  11. AIG Services Index: Wednesday, 23:30. The indicator continues to point to strong contraction in the services sector, with the past two readings failing to crack the 40-point level. Another weak reading is expected in September.

* All times are GMT

AUD/USD Technical Analysis

AUD/USD  started the week at 0.9400 and climbed to a high of 0.9457. The pair then  dropped sharply, breaking  below the 0.93 line and touching a  low of 0.9298, as support at 0.9283 (discussed last week) remained intact. AUD/USD closed the week at 0.9314.

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

 

Technical lines from top to bottom:      

We  begin with resistance at 0.9828. This line has not been tested since May. 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 continues to provide strong resistance.

0.9556 has provided resistance since mid-June. At that time, AUD/USD went on a spiral that saw it drop below the 0.92 line.

0.9428 continues to provide resistance. It has some breathing room as the pair trades at lower levels.

0.9283  saw  a lot of action in  the months of June and  July, alternating between resistance and support roles. It faced some pressure as the Australian dollar has weakened this week, but held firm.

0.9180  continues to provide support. The  round number of 0.90 is next.  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 last week.

0.8893 has been a steady support line since August 2010,  when  the Australian dollar put together a strong  rally which saw it  climb  above the 1.10 line.

The final support line for now is 0.8747. This line  has remained in place since July 2010.

I  am  bearish on AUD/USD.

The RBA  has indicated that it  wants a lower Australian dollar to help boost the economy, and this sentiment could weigh on the currency.  Although the RBA isn’t expected to lower rates, it could take note of a fragile and currency which is higher than it prefers. In the US,  a spat in Congress over the budget could lead to  a government shutdown this week, as Democrats and Republicans play political hardball. How this event plays itself out could have a major impact on the currency markets.

The Aussie sometimes moves in tandem with gold. You can trade binary options on gold using this technical analysis.

Further reading: