AUD/USD Forecast June 3-7

The Australian dollar  continues to lose ground against the US currency, although last week’s losses were modest. AUD/USD closed the week at 0.9570. The upcoming week is very busy, with 13 releases.  Here is an outlook of the events and an updated technical analysis for AUD/USD.

Australian releases were mixed last week, and key US releases were a big disappointment on Thursday. Investors have responded by seeking the safety of the US dollar, which has hurt the struggling Australian currency.

Updates:

• AUD/USD started the week with a rise towards 0.9650,  thanks to a better than expected official Chinese manufacturing PMI. However, here are 4 reasons why the Aussie could slide.
• Rally: The terrible manufacturing PMI in the US sent the dollar down across the board and AUD/USD finally made it above 97.
• Extended rally: AUD/USD extends its gains and already reached 0.9762, more than 2% in one day. Could the rising value of the Aussie impact the RBA decision?
• AIG Manufacturing Index jumped from 36.7 points to 42.8 points. The indicator has been below the 50-point level since February 2012. MI Inflation Gauge rose 0.2%, slightly lower than last month’s rise of 0.3%.
• Retail Sales, a key indicator,  posted a gain  o.2%. The estimate stood at 0.3%.  ANZ Job Advertisements recorded a third straight decline, dropping 2.4%. Company Operating Profits rebounded nicely, gaining 3.0%. This surpassed the estimate of 1.6%.
• Commodity Prices continue to slump, as the indicator posted a decline of 8.6%. Current Account improved, with the deficit shrinking from AUD14.7 billion to AUD8.5 billion. This beat the estimate of AUD8.9 billion.
• See how to trade the Australian GDP with AUD/USD (Wednesday 1:30 GMT).
• RBA leaves rates unchanged, but warns about exchange rate – This was expected. AUD/USD dipped below 0.97 but recovered quickly. Where next?
• AIG Services Index will be released later on Tuesday. AUD/USD remains volatile. After testing the 98 line on Monday, the pair has lost ground, and was trading at 0.9674. We could see AUD/USD Continue Lower Within Larger Downtrend (Elliott Wave Analysis).
• Australian GDP disappointed and AUD/USD is lower: Q1 growth came out at 0.6% instead of 0.7% and the Aussie began a gradual yet significant decline to as low as 0.9557.
• The Aussie remains pressured and found a fresh low of 0.9546, despite weaker than expected US ADP Non-Farm Payrolls: only 135K.
• US ISM Manufacturing PMI came out within expectations, but with a weak employment component. AUD/USD remains pressured.
• AUD/USD grinding down towards 0.95 as pressure mounts – And it follows up with a loss of this line
• Aussie getting closer to critical support: the pair crashed to 0.9434, losing nearly 100 pips from the previous trough and it is getting closer to the critical 0.9388 line. Trade Balance took part of the blame, as the surplus dwindled to just AUD0.03 billion, missing the estimate of AUD0.20 billion.
• AIG Construction Index will be released later on Thursday. The week wraps up with Chinese Trade Balance, tentatively scheduled for Saturday. This key Chinese release should be treated as  market-mover for the Australian dollar. AUD/USD was testing the 0.95 line, as the pair was trading at 0.9492.
• The US dollar collapsed across the board  – following the mediocre jobless claims and the ECB.  AUD/USD recovered nicely but finds it hard to hold on to gains.
• Towards the Non-Farm Payrolls, the  only pair where USD is still looking bullish at the moment is AUD/USD: Elliott Wave Analysis.
• Non-Farm Payrolls +175K, unemployment rate 7.6%  – The slightly better than expected outcome was an opportunity for a big dollar comeback, and for the Aussie, this meant a crash to new 20 month lows.
• AUD/USD partially recovered and closed at 0.9493.
• During the weekend, China reported weak trade figures, and this could hurt AUD/USD on Monday. Stay tuned for an updated Australian dollar forecast for June 10-14 on Sunday.

AUD/USD graph with support and resistance lines on it. Click to enlarge:  

1. AIG Manufacturing  Index: Sunday, 23:30. This index slumped to a  multi-year low in the previous reading, dropping to 36.7 points. The indicator has not been above the 50-point line since February 2012, indicating ongoing contraction in the manufacturing sector. Will the index show some improvement in the upcoming reading?
2. MI Inflation Gauge:  Monday, 0:30. This indicator is released monthly. Analysts use it to predict inflation on a monthly basis, since CPI is only released every quarter. The indicator posted a minor gain of 0.3% last month.
3. Retail Sales:  Monday, 1:30. This key indicator has shown some volatility, making accurate predictions difficult. The indicator sagged in May, declining by 0.4%. The markets had anticipated at 0.2% gain. The markets are expecting some improvement, with an estimate of 0.3%.
4. ANZ Job Advertisements: Monday, 1:30. This important employment indicator has posted two straight declines, indicating trouble in the employment market. Will we see any improvement in the upcoming release?
5. Company Operating Profits:  Monday, 1:30. This indicator provides an important snapshot of the health of the business sector, and the news is not good. The indicator has posted declines for five consecutive quarters. However, the markets are predicting a turnaround, with an estimate of a 1.6% gain for Q1. Will the indicator meet or beat this rosy prediction?
6. Commodity Prices: Monday, 6:30. Commodity Prices continues to decline, as the export sector suffers from weak global demand. A weak Japanese yen has aggravated the situation, as Japanese exports have become cheaper. Little change is expected in the June release.
7. Current Account:  Tuesday, 1:30. Australia continues to post monthly deficits, which have ballooned to the AUD15 billion level. The markets are expecting much better news in June, with a forecast of deficit of just AUD8.9 billion. If the forecast proves accurate, the Aussie could show some improvement.
8. Cash Rate:  Tuesday, 4:30. Earlier this month, the RBA surprised the markets with a rate cut, lowering rates to 2.75%. This reduction contributed to the sharp fall the Aussie sustained in May. The markets are not expecting any change in the upcoming release, which will be announced in a rate statement.
9. AIG Services Index:  Tuesday, 23:30. The index continues to post numbers below the 50-point level, indicating contraction in the services sector. The index dropped sharply in May, posting a weak reading of 44.1 points. The markets will be hoping for better news in the June release.
10. GDP:  Wednesday, 1:30. GDP is one of the most important economic indicators, and often impacts on the direction of AUD/USD. GDP rose 0.6% last month, and the markets are expecting a rise of 0.8% in the June reading.
11. Trade Balance:  Thursday, 1:30. Last month, Australia posted a monthly trade surplus for the first time in almost a year. The markets are anticipating another small surplus, with an estimate of $0.21 billion.
12. AIG Construction Index:  Thursday, 23:30. The construction industry continues to struggle, as underscored by the very weak reading we saw last week, as the index dropped to 35.2 points. No significant change is expected in the upcoming release.
13. Chinese Trade Balance: Saturday, Tentative. Chinese Trade Balance bounced back nicely in May, posting a surplus of $18.2 billion and easily surpassing the estimate of $15.5 billion. The markets are expecting an improvement in the June release, with an estimate of $20.8 billion. Traders should treat this indicator as a market-mover, given that China is Australia’s number one trading partner.

AUD/USD Technical Analysis

AUD/USD opened at 0.9634, and touched a high of 0.9697.   The pair then dropped sharply, touching a low of 0.9528, as support at 0.9504  (discussed last week) held firm.  The pair closed the week at 0.9570.   [do action=”tradingviews” pair=”AUDUSD” interval=”60″/]

Technical lines from top to bottom:      

We  begin with strong resistance at  1.0183. This line last saw action in  early  May.  The next line of resistance is at 1.0093. This is followed by the parity line, which AUD/USD  broke through  in mid-May, as it continues to push to lower levels.

The next resistance line is at 0.9913. This is followed by 0.9797, which had served as support  since June 2012, but was brushed aside as the Aussie slumped.  The next  resistance line is at 0.9634. This line  was breached as the pair showed some upward movement, but remained intact at the end of  the week.

AUD/USD is receiving  support at 0.9549. This line was briefly breached last week, and could see more activity early next week if the Aussie’s slump continues. This is followed by 0.9405, which is protecting the 94 level. This line has remained intact since October 2011.  Below is 0.9275, which has not been tested since September 2010. The final support line for now is at 0.9071.

I  continue to be  bearish on AUD/USD.

The Australian  dollar can’t  seem to maintain any upward momentum, and continues to lose ground to the  US dollar.  AUD/USD  lost a remarkable eight  cents in May, and the bleeding could continue if we don’t see some solid numbers out of Australia.

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

Further reading:

• For a broad view of all the week’s major events worldwide, read the USD outlook.
• For EUR/USD, check out the Euro to Dollar forecast.
• For the Japanese yen, read the USD/JPY forecast.
• For GBP/USD (cable), look into the British Pound forecast.
• For USD/CAD (loonie), check out the Canadian dollar forecast.