Browsing: AUD/USD Forecast

The Australian dollar posted slight losses last week. In the upcoming week, the key event is Private Capital Expenditure. Here is an outlook for the highlights of this week and an updated technical analysis for AUD/USD.

The U.S. and China have agreed to extend trade talks, after completing a fourth round of talks. Months of a bruising trade war between the world two largest economies have dampened international trade. China is experiencing a slowdown, which has weighed on the Australian economy and the Aussie.

The RBA minutes indicated concern among policymakers, who noted “significant uncertainties” on the economic outlook. Participants in the February meeting did not expect to move rates in the near term, and said that trade tensions were a “material risk” to global economic forecast. The labor picture remains bright, as the economy created 39.1 thousand jobs, crushing the estimate of 15.2 thousand.

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

  1. Construction Work Done: Wednesday, 00:30. This important gauge of the construction sector swings wildly, making accurate forecasts a tricky task. The indicator slid 2.8% in Q3, well off expectations. The markets are expecting a strong rebound in Q4, with an estimate of 0.6%.
  2. Private Capital Expenditure: Thursday, 00:30. Investment levels in the business sector have been in decline, with the indicator posting three declines in the past four quarters. The markets are expecting better news is expected in Q4, with a forecast of 1.1%.
  3. Private Sector Credit: Thursday, 00:30. Credit levels continue to soften, pointing to slower economic activity. The indicator dropped to 0.2% in December, its lowest level in seven months.
  4. AIG Manufacturing Index: Thursday, 21:30. The manufacturing sector has been hurt by the slowdown in China, so it’s no surprise that the manufacturing index has hovered near to 50-level, which separates contraction and expansion. The indicator came in at 52.5 in January, pointing to weak expansion.

*All times are GMT

AUD/USD Technical Analysis

AUD/USD posted strong gains but then gave these up late in the week. On Friday, the pair tested support at 0.7085 (mentioned last week). on Friday, but rebounded and ended the week with gains.

Technical lines from top to bottom:

0.7480 capped the pair in mid-July and defends the round 0.75 level.

Next is the round number of 0.74, the high point reached at the wake of December. This is followed by 0.7340, which the pair breached in late November.

0.7315 was a swing high seen in late September. Further down, 0.7240 separated ranges in September and in October. 0.7190 marked a low point in the first week of December.

Lower, 0.7165 was a swing low after a recovery in mid-November. 0.7085 was a low point in September and protected the symbolic round number of 0.70.

Close by, 0.6970 played a role back in January 2017.

Below, 0.6825 supported the pair in late 2016 and early 2017.

0.6744 was a low point in January.

I am bullish on AUD/USD

Investor risk appetite has strengthened on optimism that trade tensions between the U.S. and China are easing. If President Trump removes a March 1 deadline to impose new tariffs, the Aussie could record strong gains.

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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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