Browsing: AUD/USD Forecast

AUD/USD recorded sharp losses last week, dropping 1.5%. The pair broke below the symbolic 0.70 level for the first time in 2019. Traders should keep a close eye on Chinese Caixin Manufacturing PMI and Australian building approvals. Here is an outlook for the highlights of this week and an updated technical analysis for AUD/USD.

Australian CPI dropped sharply in Q1, sending the Aussie reeling. CPI fell to 0.0%, down from 0.5% in Q4. This was the weakest reading since Q1 of 2016. Core CPI edged lower to 0.3%, shy of the estimate of 0.4%. In the U.S, last week’s numbers were positive. Durable goods orders climbed 2.7%, crushing the estimate of 0.7%. Core durable goods orders gained 0.4%, marking a 9-month high. This was followed by a strong initial GDP release of 3.2% in Q1, well above expectations. This was much stronger than Final GDP for Q4, which came in at 2.2%.

The U.S, posted strong numbers last week. Durable goods orders climbed 2.7%, crushing the estimate of 0.7%. Core durable goods orders gained 0.4%, marking a 9-month high. This was followed by a strong initial GDP release of 3.2% in Q1, well above expectations. This was much stronger than Final GDP for Q4, which came in at 2.2%.

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

https://www.tradingview.com/x/uQiwFjkL/

  1. Private Sector Credit: Tuesday, 1:30. Borrowing levels remain low, pointing to softness in consumer spending. The indicator posted a gain of 0.3% in February and no changed is expected in the March release.
  2. AIG Manufacturing Index: Tuesday, 22:30. With China gripped by a slowdown, the Australian manufacturing sector is under pressure. The Australian Industry Group index fell to 51.0 in March, pointing to stagnation.
  3. Chinese Caixin Manufacturing PMI: Thursday, 1:45. The nasty trade war between the U.S. and China has taken a toll on the Chinese economy, and the manufacturing sector has been hard hit. The PMI has sagged in Q1, twice posting declines. The forecast for April is 51.0, indicative of muted activity.
  4. AIG Services Index: Thursday, 22:30. The index has been mired below the 50-level in Q1, pointing to contraction in the services index. The March release came in at 44.8 points.
  5. Building Approvals: Friday, 1:30. This key event tends to show sharp swings, making accurate estimates a tricky task. The February gain of 19.1% crushed the forecast of -1.7%. Will we see another strong gain in March?

*All times are GMT

AUD/USD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 0.7480. This marked the high point of the pair in mid-July and defends the round 0.75 level.

The round number of 0.74 was 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 remains relevant and was tested during the week.

Lower, 0.7165 was a swing low after a recovery in mid-November. 0.7085 was a low point in September.

Close by, 0.6970 (mentioned last week) was under pressure late in the week as the pair posted sharp losses.

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

0.6744 was a low point in January.

0.6686 was an important cap back in January 2000. It is the final support line for now.

I remain bearish on AUD/USD

The U.S-China trade war has taken a toll on the Australian economy, as China is Australia’s largest trading partner. With the RBA in dovish mode, the Aussie will have a tough time attracting investors.

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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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