AUD/USD forecast and technical analysis ► review of the major events that will move the Australian Dollar (Aussie) during the upcoming week. Here is some general information. Scroll down for the latest AUD/USD outlook
The Australian dollar is a “risk” currency. It tends to do well when stocks and commodities rise and when the atmosphere improves. It tends to fall when things get worse: geopolitical risks increase.
The A$’s technical behavior is usually one of the best out there. This implies respecting lines of support and resistance, trend lines, etc. AUD/USD has become more popular for techies in recent years, even after the financial crisis which saw the end of the famous “carry trade.”
Australia exports commodities, mostly of metals such as iron and copper. The commodity boom kept Australia out of recession for around 25 years. The land down under enjoyed the mining boom related to Chinese growth. While the mining boom has probably peaked regarding growth, the sector still churns out quite a lot, as China has a soft landing.
AUD/USD Recent Moves
Interest rates have been dropping in recent years, after an early post-crisis hike cycle. However, it seems that the new governor of the RBA, Philip Lowe, is not keen to take them lower.. Chinese data releases still have an impact, but not as strong as in the past.
The days of AUD/USD parity are gone, but the pair is moving to the high 70s, and a move higher cannot be ruled out.
AUD/USD posted losses for a third straight week, losing about 100 points last week. The pair closed at 0.7267. There are five events on the schedule this week. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.
In the US, key numbers were mostly positive last week. Retail Sales beat expectations and consumer confidence numbers surged higher. There were no major Australian releases last week, but Chinese Industrial Production missed expectations.
AUD/USD graph with support and resistance lines on it. Click to enlarge:
RBA Monetary Policy Meeting Minutes: Tuesday, 1:30. The markets will be combing through the minutes, following the RBA’s surprise cut of a quarter point, lowering rates from 2.00% to1.75%. Dovish minutes could send the Aussie to lower levels.
MI Leading Index: Wednesday, 00:30. The index hasn’t posted a gain in 2016, pointing to weakness in the Australian economy. Will we see an upturn in the April return?
RBA Assistant Governor Guy Debelle Speaks: Wednesday, 1:00. Debelle will speak at a conference in Beijing, China. A speech which is more hawkish than expected is bullish for the Australian dollar.
Wage Price Index: Wednesday, 1:30. Wage growth has been steady and came in at 0.5% Q1, within expectations. The estimate for Q2 stands at 0.5%.
Employment Change: Thursday, 1:30. Employment Change is the most important employment indicator, and an unexpected reading can have a sharp impact on the movement of AUD/USD. The indicator posted a sharp gain of 26.1 thousand in March, beating the estimate of 18.6 thousand. The estimate for the April report stands at 12.3 thousand. The unemployment rate is expected to edge higher, from the current 5.7% to 5.8%.
* All times are GMT
AUD/USD Technical Analysis
AUD/USD opened the week at 0.7373. The pair touched a high of 0.7402, as resistance held at 0.7438 (discussed last week). AUD/USD then changed directions and dropped to a low of 0.7254. AUD/USD closed the week at 0.7267.
Live chart of AUD/USD:
Technical lines from top to bottom:
0.7692 has held firm has resistance since early May, when AUD/USD began a sharp downward trend.
0.7597 is the next line of resistance.
0.7438 held firm as AUD/USD moved higher before retracting.
0.7334 was a cap December 2015. It is an immediate support line.
0.7192 is the next support level.
0.7105 has been a cushion since the end of February.
0.7002 is providing support just above the psychologically important level of 0.7000.
0.6875 is the final support level for now.
I am bearish on AUD/USD
The RBA lowered rates earlier in May and could make another cut in August, after the Australian election. With the Federal Reserve contemplating a rate hike in June, the recent Aussie slide could continue.