Australian Dollar Outlook – November 2-6 2009

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Looking for the latest outlook, for the current week? Check out the section: AUD/USD Forecast

After giving in to the dollar, the Aussie could rise this week on another rate hike. This is part of a very busy week for Aussie traders – there are twelve more events in Australia. Here’s an outlook for the major events and an updated technical analysis for AUD/USD.

AUD/USD chart with support and resistance lines marked:

AUD/USD Chart

The Aussie made rather sharp moves, especially after the release of the American GDP. Last week’s CPI rose by 1%, within expectations, not changing the overall picture. Apart from the rate decision,Building Approvals, Retail Sales and Trade Balance will stand out in a very busy calendar. Let’s review the events:

  1. AIG Manufacturing Index: The Australian Industry Group surveys 200 manufacturers about their expectations for the future. The score is similar to that of the purchasing managers’ index: above 50 means expansion, and that was the result in the past two months, with 52 last time. It’s expected to continue rising this time. Published on Sunday at 22:30 GMT.
  2. MI Inflation Gauge: Last week’s CPI wasn’t a big surprise. The Melbourne Institute releases its gauge, which gives another look at inflation. In the past two months, this gauge didn’t move at all. This time, it’s expected to rise modestly. Published on Sunday at 23:30 GMT.
  3. HPI: Australian house price index has risen last quarter for the first time in a year. The housing sector was late to recover. After a rise of 4.2% last quarter, the positive trend is expected to continue in the third quarter, with a rise of 3.1%. Published on Monday at 00:30 GMT.
  4. Commodity Prices: The Aussie is known as one of the commodity currencies, so this index is important for it. The rise in the price of oil has an impact on all the commodities, so a rise is expected here. Published on Monday at 5:30 GMT.
  5. Rate decision: Australia was the first country in the West to raise interest rates. New Zealand was not the second country to do so, so Australia will probably also be the second country to do that.  After raising the Cash Rate to 3.25%, another 0.25% raise is expected to 3.5%. Expectations are based on many hawkish comments made by Glenn Stevens during the recent weeks. The accompanying RBA Rate Statement will hint future policy – how close rate hikes will arrive. Published Tuesday at 2:30 GMT. This is the major event for this week.
  6. AIG Services Index: Following Monday’s Manufacturing Index, this complementary indicator is published on Tuesday at Tuesday at 22:30 GMT. June’s figure was above 50, but it went below this important level afterwards. After 49.3 last month, it’s expected to rise above 50 once again.
  7. Building Approvals: This housing indicator isn’t stable. After plunging by 12.5%, it rose sharply for two months before dropping last month by 0.1%. This time, it’s expected to post a relatively steady rise of 2.4%. Building Approvals have a long term effect on the economy. This is an important indicator. The impact is might be weaker due the retail sales release at the same time, Wednesday at 00:30 GMT.
  8. Retail Sales: Australian consumers are less stable than the economy. After two months of squeezing sales, hey increased by 0.9% last month, pushing the Aussie higher. This time, they are expected to rise by 0.5%. Published on Wednesday at 00:30 GMT.
  9. Trade Balance: Trade with China is good and is one of the main reasons for Australia’s resilience, but the trade balance suffers. In the past 5 months, it has shown a deficit. Last month’s 1.52 billion deficit is probably going to be followed by a deeper one: 2.16 billion. A better result will help the Aussie. Published on Thursday at 00:30 GMT.
  10. Glenn Stevens talks: Two days after the rate decision, Glenn Stevens will make a public appearance and talk about “The Road to Prosperity”. Last month, his first appearance after the rate decision included hints about future hikes. This makes this speech no less important. He’ll be speaking on Thursday at 8:55 GMT.
  11. AIG Construction Index: The last release from AIG this week refers to the construction sector. The last release showed expansion expectations, with a score of 50.8 points. It’s expected to grow this time. Published on Thursday at 22:30 GMT.
  12. RBA Monetary Policy Statement: Following the rate statement and Glenn Stevens’ speech, this detailed statement gives another hint about future policy. It’s expected to be hawkish, with further 0.25% rate hikes in the near future. Published on Friday at 00:30 GMT.
  13. Ric Battellino talks: RBA Deputy Governor Ric Battellino will talk in Perth. In a previous public appearance in May he was rather dovish about interest rates. Given the recent policy, his words are important this time. He’ll talk on Friday at 6:20 GMT.

AUD/USD Technical Analysis

The Aussie gave in to the dollar at the beginning of the week, and then continued lower. It stopped at the support line of 0.8950, where it stopped not so long ago on its way up. After rising for temporarily on hope, it fell again and closed at 0.8980.

Below 0.8950, the area of 0.85 serves as the next support line, serving as a resistance line during the summer. Further dollar strength will halt there.

Looking up, 0.93 is a strong resistance line that was tested recently. Above that, 0.95 worked as a resistance line, and is also a round number. A strong rate hike would meet that line.

Continuing last week’s AUD/USD Outlook, and the ones before, I continue to remain bullish on AUD/USD. The Australian economy is too strong to give in to the sweeping greenback.

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    Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.