Home AUD/USD Forecast Aug. 4-8

AUD/USD  lost close to a cent last week, as the pair closed just above the 0.93 level. This week’s highlights  are Retail Sales and Employment Change. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

Australian Building Approvals and PPI both posted declines in June, hurting the Australian dollar. In the US, consumer confidence and manufacturing data were strong, but Nonfarm Payrolls  took a tumble  in June and was well off expectations.

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

AUDUSD Forecast AUG4-8

  1. Chinese  Non-Manufacturing PMI: Sunday, 00:59.  The PMI dipped to 53.4 points last month, but the index remains well above the 50-point line, which marks expansion. The Australian dollar is sensitive to key Chinese data, as China is Australia’s number one trading partner.
  2. MI Inflation Gauge:  Monday, 00:30. Inflation Gauge, which is released monthly, helps analysts track CPI, which is released each quarter. The indicator has been on a downward trend, and posted a flat 0.0% reading last month, its worst showing in almost a year.
  3. Retail Sales: Monday, 1:30. This is the first key events of the week. The indicator surprised with a 0.5% decline last month, its first drop since April 2013. The markets are expecting a turnaround in the July release, with the estimate standing at 0.3%.
  4. ANZ Job Advertisements: Monday, 1:30. Job Advertisements is an important gauge of activity on the employment front. The indicator bounce back last month with a strong gain of 4.3%.   The markets will be hoping for another solid outing in the upcoming release.
  5. AIG  Services  Index:  Monday, 23:30. The index has been mired below the 50-point level since February, indicative of ongoing  contraction  in the services sector. No  significant change  is expected in the July release.
  6. Trade Balance: Tuesday, 1:30. Trade Balance is closely linked to currency demand, as foreigners must purchase Australian dollars in order to purchase Australian exports.  Australia has posted two consecutive declines and the markets are expecting another drop in the July release, with an estimate of  -$2.00 billion.
  7. Cash Rate: Tuesday, 4:30. The benchmark rate has been pegged at the relatively low rate of 2.50% since July 2013. No change is expected in the rate this month, despite the RBA’s misgivings about the high value of the Australian dollar. The RBA will communicate the new rate in a Rate Statement.
  8. AIG  Construction Index: Wednesday, 23:30. The index has been pointing to ongoing contraction in the construction sector, with readings below the 50-point level. However, there was good news last month as the index broke through this barrier and climbed to 51.8 points. The markets will be hoping for another strong reading this time around.
  9. Employment Change: Thursday, 1:30. This key indicator can have a strong impact on the direction of AUD/USD. The indicator bounced back last month with a strong gain of 15.9 thousand, beating the estimate of 12.3 thousand. The markets are expecting another strong gain, with an estimate of 13.5 thousand. The unemployment rate is expected to remain unchanged at 6.0%.
  10. RBA Monetary Policy Statement: Friday, 1:30. The RBA policy statement, released each  quarter,  follows on the heels of the interest rate decision. It provides insight into the factors that led to the rate decision, and  traders  should  treat  the indicator  as a market-mover.
  11. Home Loans: Friday, 1:30. Home Loans provides a snapshot of activity in the housing sector. The indicator has been listless, with two consecutive readings of 0.0%. The markets are expecting a strong improvement in the upcoming release, with an estimate of 0.7%.
  12. Chinese Trade Balance: Friday, Tentative. The indicator slipped to $31.6 billion last month. Although this was a strong reading, it fell well shy of the estimate of $37.3 billion. The downward trend is  expected to continue in July, with the forecast standing at $26.0 billion.
  13. Chinese CPI: Saturday, 1:30. Chinese CPI is the primary gauge of consumer inflation and can affect the movement of AUD/USD. The indicator slipped to 2.3% last month, and an identical reading is  expected in the July release.

AUD/USD Technical Analysis

AUD/USD  opened the week at 0.9400 and  quickly touched a high of 0.9416. The pair then reversed directions,  dropping to a low of 0.9275 and breaking below support at 0.9282 (discussed last week). The pair closed the week unchanged at 0.9309.

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

Technical lines from top to bottom:

We  start  with resistance at 0.9910, which has remained firm since last May.

0.9757 marked the start of a rally by the US dollar back in October 2013, which saw the pair drop as low as 0.8650.

This is followed by the  round number of 0.9700, which has held firm since October 2013.

0.9526 provided key resistance in November 2013 and has remained intact since that time.

0.9441 held firm last week as the pair pushed above the 0.94 line before retracting. This line marked the high point of  the  pair in November, which saw the Aussie  go on a sharp slide and drop below the  0.89  line.

0.9369  was breached as the pair posted sharp losses.  It  has switched to  a resistance role and is currently a  weak line.

0.9279  has weakened in support as the pair trades at lower levels.  It could break early in the week if the Australian dollar continues to lose ground. 0.9179 is the next support level.

The round number of 0.9000 is a key psychological level. It has remained intact since early March.

The  final support line for now  is 0.8891.  AUD/USD broke above this line in February and it has provided strong support since then.


I  am bearish  on AUD/USD.

The Australian dollar  had enjoyed an uneventful summer, but was swept lower last week by the broadly-stronger US dollar.  The  Australian  economy remains fragile and the RBA would love to see the Aussie lose ground, although a rate decrease is unlikely. So, we could see  the  greenback’s rally continue this week.

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.