AUD/USD Forecast September 2-6

The Australian dollar continues to lose ground, as AUD/USD lost over one cent last week. The pair closed just below the 0.89 line,  at 0.8895. The upcoming week is very busy, with 14 releases.  Here is an outlook of the events and an updated technical analysis for AUD/USD.

In Australia, Private Capital Expenditure hit a five-month high, but this wasn’t enough to  help the beleaguered  Aussie. US numbers were mixed last week.  Manufacturing and housing numbers sagged,  but GDP and employment numbers were positive and  boosted the US dollar.

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

1. Chinese  Manufacturing PMI:  Sunday, 00:58.  This key index started the week on a positive note, with a reading of 51.0 points. This was slightly higher than the  estimate was 50.6 points. The PMI continues to post readings just above the 50 line, which is the separator between expansion and contraction. The Aussie is sensitive to key Chinese releases, as China is Australia’s number one trading partner.
2. AIG Manufacturing Index: Sunday, 23:30. The Manufacturing Index has looked weak, and dropped from 49.6 points in June to 42.0 points in July. Will the index improve in the September reading?
3. MI Inflation Gauge: Monday, 00:30. Inflation Gauge is released monthly and helps analysts track the all-important CPI release, which is published every quarter. The indicator posted a respectable gain of 0.5% last month, its sharpest gain in a year. The markets will be hoping for another respectable gain in the September release.
4. Building Approvals: Monday, 1:30. This key release tends to show a lot of volatility, making accurate predictions difficult. The indicator plunged 6.9% in the previous release, way off the estimate of 2.2%. The markets are expecting a sharp turnaround, with an estimate of a 4.1% gain. Will the indicator meet or beat this rosy prediction?
5. Company Operating Profits:  Monday, 1:30. Australia’s business sector has been going through a  difficult period, as underscored by this indicator, which had posted a string of five straight  quarters before the Q1 release. However, Q1 posted a strong gain of 3.0%, well above the estimate of 1.6%. The markets are expecting another gain for Q2, with an estimate of 1.1%.
6. Commodity Prices:  Monday, 6:30.  Australia’s  export sector  has been hit hard by the global slowdown, and Commodity  Prices continues  to  post declines.  There is no end in sight,  as the  August reading of -11.8% was the sharpest drop in 2013.
7. Retail Sales:  Tuesday, 1:30. Retail Sales is one of the most important gauges of consumer spending, which is critical for economic growth. The indicator has not looked strong, and the August reading was a  flat 0.0%, well off the estimate of 0.4%. The markets are expecting a stronger reading this time around, with an estimate of 0.4%. This would be the strongest showing since April.
8. Current Account:  Tuesday, 1:30. This important indicator is released on a quarterly basis. Australia continues to post current account deficits, although the Q1 reading of -8.5 billion dollars beat the estimate and was the lowest deficit since early 2012. The markets are not expecting much change in the Q2 release, with  a forecast of -8.3 billion dollars.
9. Cash Rate:  Tuesday, 4:30. The RBA sliced rates last month, from 2.75 to 2.50%. Despite some fairly aggressive rate reducing, the RBA has not had a lot of success in stimulating the economy, and has not ruled out further cuts in the near future. However, most analysts expect that the RBA will not lower rates this week. The new key interest rate will be announced in a rate statement.
10. AIG Services Index:  Tuesday, 23:30. The Services Index continues to point to contraction in the services  sector, and dropped to 39.4 points in August. This was the first time the index has dipped below the 40 level since May 2012.
11. GDP:  Wednesday, 1:30. GDP is one of the most important economic indicators and provides a broad measure of the health and direction of the economic activity. The indicator posted a gain of 0.6% in Q1, falling short of the estimate of 0.8%. The markets are expecting an identical gain in the Q2 release.
12. Trade Balance:  Thursday, 1:30. Australia has been posting small surpluses in recent readings. The August release came in at 0.60 billion dollars, missing the estimate of 0.81 billion. The markets are expecting a smaller surplus in August, with an estimate of just 0.11 billion dollars.
13. AIG Construction Index:  Thursday, 23:30. The Construction Index points to a weak construction index, as many releases in 2013 have been below the 40 level. However, the August release improved to 44.1 points, and the markets are hoping to see another improvement in the upcoming release.
14. Australian Parliamentary Elections:  Saturday, All Day. Australians will vote in the first federal elections since 2010. Prime Minister Kevin Rudd of the Labor party will square off against Tony Abbott of the Liberal party. Abbott, who  is favored to win the election, has said he will work to improve the economy, which has been struggling.

AUD/USD Technical Analysis

AUD/USD  started the week at 0.9027. The pair climbed to a high of 0.9070, but then reversed direction, dropping to a low of 0.8892. AUD/USD closed the week at 0.8895, as support at 0.8893 (discussed last week) remained intact.

Live chart of AUD/USD:   [do action=”tradingviews” pair=”AUDUSD” interval=”60″/]

Technical lines from top to bottom:      

We begin with resistance at 0.9428. This line had  played a support  role  since late 2011, but was breached in June and has provided strong resistance since then.

0.9283  saw  a lot of action in  the months of June and  July, alternating between resistance and support roles. It has some breathing room as a  resistance line as AUD/USD trades at lower levels.

0.9180 is the  next line of resistance. 0.9041  was briefly breached  early week as the pair moved higher but remains in place.

The  round number of 90 is next.  This psychologically important  level  has provided support since September 2010, but has seen some action over the past few weeks. It cannot be considered a safe line and could face pressure if the Aussie shows some improvement.

0.8893 has been a steady support line since August 2010, as the Australian dollar put together a strong  rally which saw it  climb  above the 1.10 line. With the pair closing the week at 0.8895, this line could be tested early in the week.

0.8747 has remained in place since July 2010.

The final support line for now is 0.8568. This line has held firm since July 2010, when the Australian dollar started a rally which saw it climb to the 1.10 line.

I  am bearish on AUD/USD.

AUD/USD had another bad week and the downward trend could  continue. The RBA has clearly indicated that it wants a weaker Australian dollar, and the currency could fall if key Australian releases do not impress. Meanwhile, the US Federal Reserve could taper QE as early as September and  continuing market speculation  about this  has been  bullish for the US dollar.

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.