Browsing: AUD/USD Forecast

AUD/USD forecast and technical analysis ► preview of the major events that will move the Australian Dollar (A$) in the upcoming week.  Here are some general data. Scroll down for the latest AUD/USD outlook

Aussie/USD characteristics

The Aussie is a “risk-on” currency. It usually rises when commodities and stocks advance and when the risk appetite improves. Its fate deteriorates when the markets are in “risk aversion” mode: geopolitical worries increase and the outlook for global demand is sluggish.

The Aussie’s technical behavior is usually admirable. This implies respecting lines of resistance and support, diagonal trend lines, etc. AUD/USD has become more popular for techies in recent years, even after the financial crisis which brought the famous “carry trade.” to a halt.

Australia exports metals such as copper and iron. We often find a positive correlation between the price of iron ore and the Aussie $. The mining boom kept Australia out of recession for over 25 years. The land down under enjoyed the high resources demand with China playing a key role. While peak investment is probably behind us, the sector still churns out quite a lot of raw materials, as China has a soft landing.

AUD/USD Recent Moves

The Reserve Bank of Australia clarified it will not change interest rates anytime soon, but they tend to lean to cutting rates. This is due to low inflation. The labor market was looking good early in the year but now looks more complicated.

Risks could arise from the Chinese economy: Australia’s No. 1 trading partner could see a slowdown after the Party Congress in October 2017. So far, things look stable, but 2018 could be different.

Latest weekly AUD/USD forecast

The Australian dollar managed to weather the risk-off sentiment and to hold its ground The upcoming week features Australian Capital Expenditure and Chinese PMI data. What’s next for the Aussie? Here are the highlights of the week and an updated technical analysis for AUD/USD.

Australia’s Construction Work Done measure disappointed by rising by only 0.2% q/q but an upwards revisions softened the blow. RBA Governor Phillip Lowe did not provide any earth-shattering news. In the US, the FOMC Meeting Minutes confirmed that a rate hike is coming in June but the Fed may take a break afterward. The mood in markets soured as trade relations between the US and China, that had seemed to improve, worsened again. Trump’s cancellation of the Summit with Kim also weighed on sentiment. Nevertheless, the Aussie weathered the storm.

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

  1. Building Approvals: Wednesday, 1:30. This gauge of the housing sector is quite volatile. Building consents rose by 2.6% in March and are expected to drop by 2.9% in April.
  2. Chinese Manufacturing PMI: Thursday, 1:00. China is Australia’s No. 1 trading partner and any change in manufacturing indicates a change in the consumption of Australian metals. The government PMI has shown OK growth with a score of 51.4 points in April. A repeat of the same number is on the cards for May.
  3. Private Capital Expenditure: Thursday, 1:30. This quarterly figure reflects investment and is closely watched by the Reserve Bank of Australia. A disappointing drop of 0.2% was seen in Q4 2017 after several quarters of strong growth. A bounce back is expected now: 1.1% in Q1 2018.
  4. Private Sector Credit: Thursday, 1:30. Rising credit results in enhanced economic growth. After a rise of 0.5% in March, a similar increase of 0.4% is projected.
  5. AIG Manufacturing Index: Thursday, 22:30. The Australia Industry Group reported upbeat prospects for the manufacturing sector with a score of 58.3 points in April, representing robust growth. A similar number is likely for May.
  6. HIA New Home Sales: Friday, early in the day. The Housing Industry Association reported a drop of 2% in sales of new homes in March, a third consecutive drop. April may see a bounce back up.
  7. Chinese Caixin Manufacturing PMI: Friday, 1:45. The independent gauge of China’s manufacturing sector stood at 51.1 points in April. This important survey is now predicted to advance to 51.3 points.
  8. Commodity Prices: Friday, 6:30. Daily changes in commodity prices have some impact on the Aussie but this monthly figure matters as well. Year over year, commodity prices dropped by 1.4% in April.

*All times are GMT

AUD/USD Technical Analysis

Aussie/USD did not go anywhere fast and remained close to the 0.75 level (mentioned last week).

Technical lines from top to bottom:

0.7730 capped the pair in early April. 0.7675 provides some support in March and is another stepping stone.

Further below, 0.7640 was a stubborn cushion in March and April. The fall below this line proved its strength. 0.7610 was the peak of an upwards move in late May.

0.7560 is the next level to watch after it was the recovery level in early May. 0.7520 was a swing low in late May.

0.7430 was an initial low in late April and it is followed by 0.7410, an old line from 2017. Further down, 0.7375 is notable.

I remain bullish on AUD/USD

Australia’s latest economic figures are OK and the nation is on good terms with both the US and China. This could help the Aussie dollar maintain relative strength even if the mood further worsens.  

Our latest podcast is titled Truce in trade and dollar domination

Follow us on Sticher or iTunes

Further reading:

Safe trading!

Get the 5 most predictable currency pairs
1 2 3 47