Home AUD/USD Forecast Mar. 6-10

AUD/USD  dropped  70 points last week, closing just below the 0.76 level.  This week’s key event are Retail Sales and the Cash Rate.  Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

In the US, Donald’s speech disappointed the markets, but stronger market sentiment over a rate hike boosted the greenback.  Hawkish comments from Dudley  and then from Brainard  have sharply raised expectations of a March hike. In Australia, GDP sparkled with a gain of 1.1%, but the Aussie couldn’t take advantage.

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

  1. MI Inflation Gauge: Monday, 00:00. This monthly indicator helps predict CPI, which is only released each quarter. In January, the indicator edged up to 0.6%, its highest level since June.
  2. Retail Sales: Monday, 00:30. Retail Sales is the primary gauge of consumer spending. The indicator surprised the markets with a decline in December, dropping 0.1%. This was well below the forecast of +0.3%. Better news is expected in January, with an estimate of 0.4%.
  3. AIG Construction Index: Monday, 22:30. The index has posted four straight readings below the 50-point level, indicative of ongoing contraction. However, the indicator has been moving higher and improved to 47.7 in January. Will the upward trend continue in the February report?
  4. Cash Rate: Tuesday, 3:30.  The benchmark rate is expected to remain at 1.50%, where it has been pegged since August 2016. The markets will be keeping a close eye on the rate statement, which should be treated as a market-mover.
  5. Chinese Trade Balance: Wednesday, Tentative. China is Australia’s number one trading partner, so key Chinese indicators can have a strong impact on the movement of the Australian dollar. In January, the trade surplus jumped to $355 billion, easily beating the forecast of $295 billion. The markets are braced for a much softer reading in February, with an estimate of $173 billion.
  6. Chinese CPI: Thursday, 1:30. CPI jumped to 2.5% in January, edging above the forecast of 2.4%. The index is expected to soften in February to 1.9%.
  7. Home Loans: Friday, 00:30. Home Loans fell to 0.4% in December, short of the forecast of 1.0%. The market is expecting a downturn in January, with an estimate of -0.9%.

AUD/USD Technical Analysis

AUD/USD  opened the week at 0.7668 and quickly climbed to a high of 0.7708. The pair reversed directions and dropped to a low of 0.7542 late in the week, as support held at 0.7513 (discussed last week). AUD/USD closed the week at 0.7593.

Live chart of AUD/USD:

Technical lines from top to bottom:

We start with resistance at 0.8066.

0.7938 is next. This line has held in resistance since May 2015.

0.7835 was the high point in April 2016.

0.7691  is the next line of resistance.

0.7513 is providing support. This line was a cushion in April 2015.

0.7427 is next.

0.7311 marked a low point in November.

0.7223 is the final support level for now.

I am bearish on AUD/USD

The Trump administration’s first month in office has been beset by difficulties, and there could be more trouble ahead. Still the US economy is doing well and growing optimism over a March rate hike is bullish for the US dollar.

Our latest podcast is titled  March hike, Macron, and Mario Draghi

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Safe trading!

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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.