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AUD/USD Forecast, Minors

AUD/USD Outlook – Oct. 31 – Nov. 4

The  Aussie  had another volatile week that provided quite a few opportunities and it eventually ended it on higher ground. The upcoming week is very busy, with the rate decision being the highlight of 12 events. Here’s an outlook for these events, and an updated technical analysis for AUD/USD.

The moderate rise in prices leaves room for a rate cut that will weaken the Aussie. On the other hand, the fresh signs of strength from China helped the Australian dollar. We have more data from China alongside Australian data.

Indeed, the Australian central bank decided to lower the interest rate to 4.50%. Together with the mess in Greece following the decision to hold a referendum and the unchanged policy in the US, the Aussie feels a lot of pressure and loses ground.  The mixed job figures in the US kept the Aussie in the tight range.

AUD/USD daily graph with support and resistance lines on it. Click to enlarge:AUD/USD Chart October 31 November 4 2011

  1. HIA New Home Sales: Publication time unknown at the moment. The Housing Industry Association in Australia has shown a small recovery of 1.1% after two months of sharp falls. Sales of new homes are expected to tick up once again.
  2. MI Inflation Gauge: Sunday, 23:30. The government releases official inflation numbers only once per quarter. So, this independent measure of inflation provides some updated insight. After a minor rise of 0.1% in September, a small drop is likely now.
  3. Private Sector Credit: Monday, 00:30. Despite the global slowdown, credit continued expanding in the past few months. More credit means more economic activity. A similar rise to last month’s 0.2% gain is likely now.
  4. AIG Manufacturing Index: Monday, 22:30. This is a PMI-like gauge of the manufacturing sector, the first of a series provided by the Australian Industry Group. In the past three month, the number has been well below the 50 point mark separating contraction and growth. A small recovery from last month’s 42.3 points is expected, but the figure will likely remain under 50 points.
  5. HPI: Tuesday, 00:30. While this isn’t the earliest housing sector indicator available, the scope of this figure is quarterly, making it of high importance. After a two consecutive drops, a small rise is expected for Q3 2011.
  6. Chinese Manufacturing PMI: Tuesday, 1:00. Australia’s No. 1 trade partner is still growing, although at a slow pace. The unofficial HSBC figure has shown a few months of shallow contraction. A small slide from last month’s 51.2 points is predicted now.
  7. Rate decision: Tuesday, 3:30. Glenn Stevens and his colleagues are likely to stop the “wait and see” policy and cut the rate to 4.50% following the weak CPI. Employment is OK and inflation is a bit lower. A rate cut was hinted by the RBA in the latest meeting minutes, but and can happen now. On the other hand, the Australian rate decision comes before the critical G-20 meetings and rate decisions from the US and Europe. So there’s still a chance that Stevens will wait to see what happens in the markets.
  8. Commodity Prices:  Tuesday, 5:30. Australia’s economy relies heavily on the export of commodities. So, any change in prices has an impact on the economy. The year over year figure will probably rise at a lower rate than last month’s 26.6% rise.
  9. Building Approvals: Wednesday, 00:30. This is one of the most important housing sector indicators, even though it is very volatile. Last month’s huge jump of 11.4% came after a few months of relatively small changes. A correction is expected now.
  10. AIG Services Index: Wednesday, 22:30. This sector is of higher importance and it provides some hope. The past two months have seen some growth according to AIG, with the score hitting 50.3 points last month. It will probably dip below 50 this time.
  11. Retail Sales: Thursday, 00:30. Australian consumer have been quite active in the past two months, with the volume of sales rising by 0.6% each month. A small drop is likely now, for the month of September.
  12. RBA Monetary Policy Statement: Friday, 00:30. The RBA will have the final word for the week. The quarterly report by the central bank will supply a comprehensive overview of the economy and what’s facing it in the upcoming months. Hints about rate moves will add to the action already provided by the rate decision earlier in the week.

* All times are GMT.

AUD/USD Technical Analysis

The Aussie began the week with a first move upwards that got stuck around the 1.0480 line (mentioned last week). It then fell to support around the 1.0314 line. It then began a big surge and closed just under 1.07.

Technical levels from top to bottom:

We begin from the float era peak of 1.1080, which was reached in July. It’s followed by a a previous peak of 1.1012 touched in April.

1.0880 was a peak in April and later provided support when the pair was trading in a higher range. 1.0764 was a swing high in August and also during May, and was approached in October.

The round number of 1.06 worked in both directions in recent months.  1.0480 was weak support in August.

The round number of 1.04 was a swing low in June and also the peak of a failed recovery attempt in September. It was also a cap in October.  1.0314 was a stepping stone on the way up many months ago and also a line of support in August.

The 2010 peak of 1.0254 is now weaker than earlier, but it is still of importance, the same as the previous line.  1.01 was the area of a cushion around July and also provided support after the recent surge in October, for two weeks in a row.

The next line is obvious: AUD/USD parity. The very round number has strengthened in September after capping a recovery attempt. It also proved its importance in October.  Below parity, 0.9930 is weak resistance after holding back in August.

I am bearish on AUD/USD.

A lot depends on the rate decision. The chances are higher with lower inflation and the struggling house sector, but the current turbulence and the nice Chinese figures might cause Stevens to wait.

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Yohay Elam

Yohay Elam

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.