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AUD/USD Forecast July 6-10 – Aussie Closing in on 70, RBA Decision Ahead

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AUD/USD showed strength last week, gaining 1.1 percent. The upcoming week has seven events. Here is an outlook at the highlights and an updated technical analysis for AUD/USD.

There was positive news from Australia’s manufacturing sector, as the AIG Manufacturing Index improved to 51.5 in June. This marked its first reading in expansion territory since March. The 50-level separates contraction from expansion. Australia’s trade surplus narrowed to A$8.03 billion, down from A$8.80 billion a month earlier. Consumer spending has jumped, as retail sales climbed 16.9% in May. This follows a gain of 16.3% in June.

In the U.S., manufacturing improved sharply, as Manufacturing PMI climbed from 39.8 to 49.6 points. The estimate stood at 50.0, which separates contraction from expansion. Durable goods orders sparkled in May. The headline figure climbed 4.0%, rebounding after a decline of 7.4 percent. The core reading surged 15.8%, rebounding from a read of -17.2% beforehand. The Conference Board consumer confidence index jumped from 85.9 to 98.1 and easily beat the estimate of 91.6 points. Nonfarm payrolls shot up in June, with a gain of 4.80 million. This comes after a May release of 2.509 million. Unemployment claims dropped from 1.48 million to 1.42 million, higher than the estimate of 1.35 million.
AUD/USD daily chart with support and resistance lines on it. Click to enlarge:
  1. MI Inflation Gauge: Monday, 1:00. The Melbourne Institute inflation gauge provides a monthly look at inflation. The index declined by 1.2% in May, as inflation remains at weak levels. We now await the June data.
  2. AIG Services Index: Monday, 22:30. The services sector continues to show significant contraction. The index came in at 31.6 points in May, up from 27.1 beforehand. Will the upswing continue in June?
  3. RBA Rate Decision: Tuesday, 4:30. The RBA is expected to maintain the cash rate at 0.25%, where it has been pegged since March. Investors will be carefully combing the rate statement, looking for clues as to future monetary moves. With AUD/USD soaring 12% in Q2, policymakers will have to give some thought to raising rates to keep a lid on the value of the Aussie.

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AUD/USD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 0.7250.

0.7165 has held firm since early April. 0.7085 is next.

0.6960 is protecting the 0.70 line, which has psychological significance. This line is under pressure.

0.6825 (mentioned last week) has some breathing room in support following strong gains from AUD/USD this week.

0.6744 was a low point in January.

0.6627 has provided support since late May. It is the final support line for now.

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I am neutral on AUD/USD

The Australian dollar has surprised many with its huge gains in recent months? The US dollar has sagged, but with the US economy showing signs of recovery, investors may want to piggyback on the greenback. At the same time, China’s economy is also improving, which is a bullish sign for the Australian dollar.

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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

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