Browsing: AUD/USD Forecast

AUD/USD displayed some volatility during the week, but ended the week unchanged. The upcoming week has four events, including the RBA minutes and key employment releases. Here is an outlook at the highlights and an updated technical analysis for AUD/USD.

In Australia, Services PMI dipped to 42.5, down from 44.0 beforehand. The 50-level separates contraction from expansion. The National Australia Bank Business Confidence report improved to -8, up from -14. With the exception of one release, the indicator has been in negative territory since October 2018. Westpac Consumer Sentiment bounced back in September, with a strong gain of 18.0%. This follows two straight declines. The Melbourne Inflation Expectations report dipped to 3.1%, down from 3.3% beforehand. It was the weakest reading in 12 months.

In the US, unemployment claims were worse than expected. The indicator was almost unchanged at 884 thousand, higher than the estimate of 838 thousand. Inflation remained weak, as consumer inflation slowed in August. Both the headline and core readings reading dropped from 0.6% to 0.4%. Still, both releases beat their estimates. The Producer Price Index, another important inflation gauge, also slowed in August.

AUD/USD daily chart with support and resistance lines on it. Click to enlarge:
  1. RBA Monetary Policy Meeting Minutes: Tuesday, 1:30. The minutes will provide details of the RBA policy meeting earlier this month. At the meeting, the RBA maintained rates at 0.25% and was dovish in tone, noting that the economic recovery is expected to be “uneven and bumpy”. 
  2. CB Leading Index: Tuesday, 14:30.  The Conference Board indicator posted a gain of 0.4% in June. Will we see another gain in the July release?
  3. MI Leading Index: Wednesday, 00:30. The Melbourne Institute index slowed to 0.1% in July, down from 0.4% beforehand. Will the index rebound in August?
  4. Employment Report: Thursday, 1:30. Australia created 114.7 thousand jobs in July, crushing the estimate of 30.0 thousand. However, analysts are braced for a loss of 40 thousand jobs in the August report. The unemployment rate has moved higher for five successive months, rising from 7.4% to 7.5% in July. The upswing in unemployment is expected to continue, with an August estimate of 7.7%.

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AUD/USD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 0.7595.

0.7513 has held since June 2018.

0.7392 is next.

0.7294 (mentioned last week) remains an immediate resistance line.

The round number of 0.7200 is the first support level.

0.7087 is next.

0.7008, which is protecting the symbolic 0.7000 line is the final support level for now.

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I remain bearish on AUD/USD

The US dollar is showing signs of recovery, and investors may have decided to take a break from the honeymoon with minor currencies like the Aussie.

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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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