Browsing: AUD/USD Forecast

AUD/USD drifted for a second straight week. This week has four events, including consumer inflationHere is an outlook at the highlights and an updated technical analysis for AUD/USD.

The RBA minutes said that the current loose monetary policy would remain in place. The lockdown has triggered “panic buying” by consumers, which propelled March retail sales to an outstanding 8.2 percent. PMIs weakened in April. The manufacturing PMI fell to 45.6, down from 50.1. The services PMI sagged to 19.6, down from 39.8 points. This points to sharp contraction.

In the U.S., jobless claims dropped to 4.4 million, down from 5.5 million a week earlier. In the past 5 weeks, new jobless claims have totaled a staggering 26 million, as the Covid-19 crisis has shut down much of the U.S. economy. Durable goods orders in March plunged by 14.4%, its first decline in four months. The core reading declined by 0.2%, after a decline of 0.6%. The UoM Consumer Sentiment slumped to 71.8, down sharply from 89.1 a month earlier. Still, this beat the estimate of 67.8 points.
AUD/USD daily graph with support and resistance lines on it. Click to enlarge:
  1. Inflation: Wednesday, 1:30. Australia releases consumer inflation on a quarterly basis, which magnifies the impact of each release. In Q4, CPI climbed to 0.7%, up from 0.5%. This marked the highest level since Q3 of 2016. However, CPI is projected to slow to 0.2% in Q1. The core release, known as Trimmed Mean CPI, posted a gain of 0.4% for a third consecutive quarter. The estimate for Q1 stands at 0.3 percent.
  2. Chinese Manufacturing PMI: Thursday, 1:00. The PMI was unexpectedly strong in March, with a reading of 52.0. This was up sharply from the estimate of 35.7 points and beat the forecast of 44.9 points. The estimate for April stands at 51.0, which points to slight expansion.
  3. Private Sector Credit: Thursday, 1:30. Borrowing levels in the private sector rose by 0.4% in February, up from 0.3%. This was its highest gain since October 2018. The estimate for March stands at 0.3 percent.
  4. AIG Manufacturing Index: Thursday, 22:30. The index pointed to an expansion in manufacturing in March, with a reading of 53.7 points. This was sharply higher than the previous release of 44.3 and marked the first expansion in five months. Will we see another reading in expansion territory in April?

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AUD/USD Technical Analysis

Technical lines from top to bottom:

0.6627 has held in resistance since early March. 0.6560 is next.

0.6456 is providing support.

0.6380 (mentioned last week) is an immediate support level.

0.6240 is next.

0.6150 has provided support since early April.

The round number of 0.6000, which has psychological significance, is the final support level for now.

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I remain bearish on AUD/USD

Investors have been battered by the meltdown in the stock markets and risk apprehension remains high. This means that minor currencies such as the Aussie will likely remain under pressure.

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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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