AUD/USD: Trading the Australian Trade Balance

AUD/USD: Trading the Australian Trade Balance

Australian  Trade Balance, a key indicator, is released on a monthly basis. It  measures the difference in the value  between imported and exported goods. A reading that is higher than the market forecast is bearish for the US dollar.

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

Published on Wednesday at 1:30 GMT.

 Indicator Background

Trade Balance is directly linked to demand for currency, as foreigners need to purchase Australian dollars to pay for Australian exports. Thus, a surplus in the Trade Balance is bullish for the Aussie.

Since March, the indicator has managed to post a surplus only once. The markets are predicting another deficit in the October reading of 0.69 billion dollars.

Sentiments and levels

The Australian dollar was full steam ahead in the first half of September. Since then, however, it has showed some weakness. Recent PMI data has not been strong, and the Aussie could lose if we see more weak data out of China. As well, if the US economy continues to under-perform, investors   may abandon risky currencies such as the Australian dollar, in favor of the safety of the greenback

Technical levels, from top to bottom: 1.0557, 1.0482, 1.0402, 1.0340, 1.0230 and 1.0174.

5 Scenarios

  1. Within expectations: -0.78B to -0.60B: In such a case, the Aussie is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: -0.59B to -0.54B: An unexpected higher reading can send AUD/USD above one resistance line.
  3. Well above expectations: Above -0.54B: Such an outcome would propel the pair upwards, and a second resistance line might be broken as a result.
  4. Below expectations: -0.79B to -084B: A negative reading could push AUD/USD below one level of support.
  5. Well below expectations: Below -084B: In this scenario, the pair could break a second support level.

For more about the Aussie, see the AUD to USD forecast.

Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.