Browsing: AUD/USD Forecast

AUD/USD reversed directions last week, posting moderate losses. There are just four events this week. Here is an outlook at the highlights and an updated technical analysis for AUD/USD.
The RBA lowered interest rates for a second straight month, the first back-to-back cuts since 2012. The benchmark rate currently stands at an even 1.0%, a historical low. In follow-up comments, RBA Governor Lowe said that the economic outlook “remains reasonable”, but investors will no doubt be concerned at the hyper-activity of the RBA. Elsewhere, Building approvals rebounded after two consecutive declines, posting a gain of 0.1%. Retail sales improved to 0.1%, but this fell short of the forecast of 0.2%.
In the U.S., the services sector PMI continues to indicate expansion, but slowed in May. The ISM Non-Manufacturing PMI disappointed, slowing to 55.1, down from 56.9 a month earlier. This missed the estimate of 56.1. Key employment numbers were a mix in June. Wage growth remained stuck at 0.2% for a third successive month. Nonfarm payrolls rebounded with a strong gain of 224 thousand, crushing the estimate of 162 thousand. The unemployment rate ticked up to 3.7%, above the estimate of 3.6%.
AUD/USD daily graph with support and resistance lines on it. Click to enlarge:

  1. ANZ Job Advertisements: Monday, 1:30. This employment indicator has failed to post a gain since October. The decline in May was particularly sharp, with a reading of -8.4%.
  2. NAB Business Confidence: Tuesday, 1:30. Business confidence surged in May to 7 points. This was the highest reading since July.
  3. Westpac Consumer Sentiment: Wednesday, 0:30. This indicator should be treated as a market-mover, as stronger consumer confidence can translate into an increase in consumer spending. Consumer sentiment fell 0.6% in June, marking the first decline in three months. Will we see a rebound in the July release?
  4. MI Inflation Expectations: Thursday, 1:00. This is a useful inflation gauge, as inflation expectations often translate into actual inflation numbers. The indicator has recorded two straight gains of 3.3%, pointing to solid inflation levels.

Technical lines from top to bottom:

We start at 0.7340, which has held in resistance since early December.

0.7315 was a swing high seen in late September.

0.7240 separated ranges in September and in October.

0.7165 (mentioned last week) has held in resistance since early April.

0.7085 was a low point in September.

0.7022 is under pressure as AUD/USD touched a high of 0.7021 last week.

0.6988 remained relevant last week. It marked the low point in April.

0.6940 has held in support since late June.

0.6864 was a low point in May.

0.6744 was a low point in January.

0.6686 was a cap back in January 2000.

0.6547 was an important resistance line back in December 2008.

I remain bearish on AUD/USD

With the RBA lowering rates by 0.50% in just four weeks, it’s clear that the bank is very concerned about the health of the Australian economy. Investors could react by selling their Australian-dollar assets and seeking safer assets. With most economists expecting a third rate cut later in 2019, the Aussie will have a tough time keeping pace with the U.S. 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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