AUD/USD: Trading the Australian Trade Balance

The Australian  Trade Balance, released each month, measures the difference in  exported   and imported goods and services.  A reading which is higher than the market forecast is bullish for the Australian dollar.

Here are all the details, and 5 possible outcomes for AUD/USD.

Published on Tuesday at 1:30 GMT.

Indicator Background

Analysts consider Trade Balance a key economic indicator, and the release of the Australian  Trade  Balance  can affect the direction of AUD/USD. A  stronger  trade balance is bullish for the aussie, since foreigners are purchasing more Australian dollars to pay for Australian goods.

The April reading was a major disappointment, posting a deficit of -0.48B. This was well below the market forecast, which called for a surplus of 1.12B. The markets have changed their tune, and are predicting a much larger deficit of -1.37B in May. Will the  indicator be able to  beat the market estimate this month?

Sentiments and levels

Last week’s surprise interest rate cut of 0.50%  hammered the Australian dollar,  and the currency is sliding  closer to parity with its US counterpart.  The deep cut in interest rates signals that the central bank is trying to  stimulate the economy with monetary measures, and this could hurt the aussie in the short term. If key releases this week disappoint the markets, we could see AUD/USD continue to point downward. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 1.0402, 1.0340, 1.0230, 1.0080, 1.00 and 0.9964.

5 Scenarios

Within expectations: -1.41B to -1.33B. In this scenario, AUD/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.

Above expectations:  -1.32B to -1.28B: A stronger reading than predicted could push the pair above one resistance line.

Well above expectations: Above -1.28B:  In  this scenario,  AUD/USD could  push upwards, with two or more lines of resistance at risk.

Below expectations:  -1.46B to -1.42B: A lower than expected reading could pull the pair downwards, with one support level at risk.

Well below expectations: Below -1.46B: A  very weak reading  could result in the  AUD/USD  breaking two or more support levels.

For more on the Aussie, see the AUD/USD forecast.