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 tried to move to higher ground but collapsed after climbing above 0.78. Rising US yields boosted the greenback and the A$ could not match it. Will we see further falls? Here are the highlights of the week and an updated technical analysis for AUD/USD.

The prices of aluminum and other metals shot up, helping the Australian dollar, a commodity currency. However, these rises were partly the result of trade tensions which then weighed on the currency. Moreover, rising US yields, based on upbeat economic data and optimistic messages from the Fed sent the USD higher, causing a sharp turnaround.

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

  1. CB Leading Index: Monday, 14:30. The Conference Board’s composite measure of the economy, based on 7 indicators, slipped by 0.1% in January. We may see a bounce now.
  2. Christopher Kent talks: Monday, 22:00. The Assistant Governor of the RBA speaks at an event in Sydney and may already know the inflation data that is published later. In any case, Kent may shed some light on where rates will go after the central bank exits its neutral mode.
  3. Australian inflation: Tuesday, 1:30. Australia releases its inflation figures only once per quarter, making each publication a bigger deal than in other countries. In the last quarter of 2017, headline inflation rose by 0.6% q/q, a solid and stable rate. The Trimmed Mean CPI (known as Core CPI in other countries) increased by 0.4%. The figures for Q1 2018 are expected to be 0.5% on the headline and also 0.5% on the core.
  4. Import Prices: Thursday, 1:30. Prices of imports feed into consumer prices. In Q4 2017, they jumped by 2%. A slower rise of 1.3% is on the cards now.
  5. PPI:  Friday, 1:30. The Producer Price Index used to have a broader impact when it was published before the CPI number. Nevertheless, it still provides an insight about inflation in the pipeline. After an increase of 0.6%, a slower rise of 0.4% is on the cards.

*All times are GMT

AUD/USD Technical Analysis

Aussie/USD had a good start to the week, temporarily breaching the 0.7810 level (mentioned last week). It then crashed all the way below 0.77.

Technical lines from top to bottom:

0.8050 capped the pair in August and also temporarily in January, on its way up. 0.7990 was the high point in February and protects the 0.80 level.

0.7890 worked as support in February and resistance in October. 0.7810 was a swing high in mid-April.

0.7730 capped the pair in early April. 0.7675 served as a line of support in mid-March.

Lower, 0.7640 was a trough in late Marc. The last line to watch is the round 0.75 level which is where the began its ascent in December.

I remain bearish on AUD/USD

The RBA is not keen on raising rates and that is a stark contrast with the Fed. A resolution of current trade tensions may stabilize the Aussie but it is unlikely to go too far. 

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