Browsing: AUD/USD Forecast

AUD/USD forecast and technical analysis ► review of the major events that will move the Australian Dollar (Aussie) during the upcoming week.  Here is some general information. Scroll down for the latest AUD/USD outlook

Aussie/USD characteristics

The Australian dollar is a “risk” currency. It tends to do well when commodities and stocks rise and when the mood improves. It tends to fall when things get worse: geopolitical risks increase and the outlook for global demand slumps.

The A$’s technical behavior is usually very impressive. This implies respecting lines of support and resistance, trend lines, etc. AUD/USD has become more popular for techies in recent years, even after the financial crisis which saw the end of the famous “carry trade.”

Australia exports commodities, mostly of metals such as iron and copper. We often find a correlation between the price of iron ore and the A$. The commodity boom kept Australia out of recession for around 25 years. The land down under enjoyed the mining boom related to Chinese growth. While the mining boom has probably peaked regarding growth, the sector still churns out quite a lot, as China has a soft landing.

AUD/USD Recent Moves

Interest rates have been dropping in recent years, after an early post-crisis hike cycle. However, it seems that the new governor of the RBA, Philip Lowe, is not keen to take them lower.. Chinese data releases (such as the Caixin PMI) are having a growing influence once again, especially as they impact iron prices.

The days of AUD/USD parity are gone. Among the 6 factors impacting the Aussie the bears seem to have the upper hand.

Latest weekly AUD/USD forecast

AUD/USD posted slight gains last week, closing at 0.7455. There are five events this week. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

The US dollar was broadly lower as the Trump administration was racked by more scandals. Trump has been accused of interfering in an investigation by FBI director James Comey, raising suspicion of obstruction of justice by Trump. The US dollar fell on market concerns that growth-friendly policies such as tax reform and increased fiscal spending could be stalled. As well, US construction numbers were soft. In Australia, employment data sparkled, as employment change jumped and the unemployment rate dipped.

Updates:

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

  1. CB Leading Index: Monday, 14:30. This minor indicator is based on 7 economic indicators. The index has been steady, with two straight gains of 0.4%.
  2. RBA Assistant Guy Debelle Speaks: Monday, 17:30. Debelle will deliver remarks at an event in Basel. The markets will be listening closely for any clues regarding future monetary policy.
  3. MI Leading Index: Wednesday, 00:30. This minor index has been subdued in recent months, with a small gain of 0.1% in March. Will we see another gain in the April release?
  4. Construction Work Done: Wednesday, 1:30. The indicator continues to post declines, pointing to contraction in the construction sector. However, the decline in Q4 was just 0.2%, much better than the Q3 reading of -4.9%.
  5. RBA Assistant Governor Guy Debelle Speaks: Thursday, 8:00. Debelle will speak at an event in London. A speech which is more hawkish than expected is bullish for the Australian dollar.

AUD/USD Technical Analysis

AUD/USD opened the week at 0.7393 and quickly climbed to a low of 0.7455. The pair then reversed directions and climbed to a high of 0.7470, breaking above resistance at 0.7429 (discussed last week). The pair closed the week at 0.7455.

Technical lines from top to bottom

0.7835 was the high point in April 2016.

0.7749 was a cap in March.

0.7605 is next.

0.7513 has held in resistance since early May.

0.7429 has switched to a support role following gains by AUD/USD last week. It is a weak line.

0.7319 is the low point in May.

0.7223 is the next support line.

0.7105 has held since March 2016.

0.6998 is the final support level for now.

I am neutral on AUD/USD

The political turmoil in Washington has soured investors on the dollar, but minor currencies like the Aussie are unlikely to gain ground as investors have less appetite for risk.

Our latest podcast is titled Brexit bites the BOE, volatility evaporates

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