Home AUD/USD Forecast May 23-27

AUD/USD  lost ground  for a fourth  straight week, posting modest losses. The pair closed at 0.7219. This week’s highlight is Private Capital Expenditure. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

The Fed meeting minutes were surprisingly hawkish,  putting a June rate hike firmly on the table.  US unemployment numbers were within expectations and housing numbers beat the estimate. In Australia, the RBA minutes hinted at another rate cut, and employment numbers fell short of expectations.

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

AUDUSD_ Daily Chart May23-27.

  1. CB Leading Index: Monday, 14:30. This minor  indicator continues to struggle, having failed to post a gain since last August. The indicator posted a weak reading of -0.3% in February.
  2. RBA Governor Glenn Stevens Speaks: Tuesday, 3:05. Stevens will deliver remarks at an event in Sydney. Any clues regarding the timing of a rate cut could lead to volatility from AUD/USD.
  3. Construction Work Done:  Wednesday, 1:30. The indicator is pointing to weakness in the construction sector, posting sharp declines of 3.6% in the past two quarters. This was well below the estimate on both occasions. Another decline is expected in the Q1 report, with an estimate of -1.4%.
  4. Private Capital Expenditure:  Thursday, 1:30.  This is the key event of the week. The indicator posted a gain of 0.8% in the fourth quarter, breaking a nasty streak of four straight declines.  The downward trend is  expected to  continue  in  Q1, with a forecast of -3.2%.
  5. RBA  Assistant Governor Guy Debelle  Speaks: Thursday, 13:00. Debelle will speak at the Foreign Exchange Market in New York. A speech that is more hawkish than expected is bullish for the Australian dollar.
  6. RBA Assistant Governor Glenn Guy Debelle: Thursday, 22:30. Debelle will participate   on a panel  at the Financial Markets Association in  New  York. The markets will be listening closely  for hints regarding the  RBA’s  future  monetary policy.

* All times are GMT

AUD/USD Technical Analysis

AUD/USD  opened the week at 0.7272. The pair touched a high of 0.7367, testing resistance at 0.7334 (discussed last week).  AUD/USD then  changed directions and dropped to a low  of 0.7175. AUD/USD closed the week at 0.7219.

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

Technical lines from top to bottom:

0.7692 has held firm  in resistance since early May, when  AUD/USD began a sharp downward trend.

0.7597 is the next line of resistance.

0.7438 has held firm since early May.

0.7334 was a cap in December 2015. It has switched to a resistance role.

0.7192 is a weak support level.

0.7105 has been a cushion since the end of February.

0.7002 is providing support just above the psychologically important level of 0.7000.

0.6875 is the final support level for now.

I am  bearish on AUD/USD

The RBA has put the markets on notice that a rate cut is on the table, perhaps as early as August. With the Fed  contemplating a June hike, monetary divergence will continue to weigh on the Australian dollar.

In our latest podcast we examine the road to a June hike (or not)

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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.