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 closed another week on the downside but managed to stabilize. What’s next? A speech by RBA Governor Lowe stands out. Here are the highlights of the week and an updated technical analysis for AUD/USD.

Australia gained 22.6K jobs in April, better than had been expected. The good news helped the Aussie. Australia’s No. 1 trading partner, China, saw industrial output rise by 7% y/y also above predictions. In the US, yields reached new multi-year highs, supporting the greenback.

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 Leading Index showed a rise of 0.3% in the Australian economy in February. The indicator, made out of 7 figures, will likely edge up again in March.
  2. MI Leading Index: Wednesday, 00:30. The Melbourne Institute’s composite index is made out of 9 figures and it showed a drop of 0.2% in March. We may see a rise in April.
  3. Construction Work Done: Wednesday, 1:30. This quarterly measure is quite volatile: it fell by 19.4% in Q4 2017. This time, a modest rise of 1.3% is on the cards for Q1 2018. However, a bigger jump cannot be ruled out.
  4. Phillip Lowe talks Wednesday, 20:00. The Governor of the Reserve Bank of Australia will deliver a speech at the Australia-China Relations Institute in Sydney. The speech is wide and he may provide market moving comments if he talks about the state of the Chinese and Australian economies.
  5. Michele Bullock speaks Friday, 12:00. The RBA Assistant Governor Michele Bullock will give a speech in Amsterdam and will also answer questions. She may lay out a more global vision.

*All times are GMT

AUD/USD Technical Analysis

Aussie/USD continued hugging the round 0.7500 level throughout the week and eventually closed slightly above it.

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. 0.7615 capped a recovery attempt in late April.

0.7560 is the next level to watch after it was the recovery level in early May. The round number of 0.7500 remains important despite the recent breach.

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

The Australian dollar weathered the strength of the greenback quite well and enjoys OK economic data. If the USD takes a break, the Aussie is well positioned to take advantage of it. 

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