Browsing: AUD/USD Forecast

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

AUD/USD dropped 70 points last week, closing just below the 0.76 level. This week’s key event are Retail Sales and the Cash Rate. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.

In the US, Donald’s speech disappointed the markets, but stronger market sentiment over a rate hike boosted the greenback. Hawkish comments from Dudley and then from Brainard have sharply raised expectations of a March hike. In Australia, GDP sparkled with a gain of 1.1%, but the Aussie couldn’t take advantage.

Updates:

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

  1. MI Inflation Gauge: Monday, 00:00. This monthly indicator helps predict CPI, which is only released each quarter. In January, the indicator edged up to 0.6%, its highest level since June.
  2. Retail Sales: Monday, 00:30. Retail Sales is the primary gauge of consumer spending. The indicator surprised the markets with a decline in December, dropping 0.1%. This was well below the forecast of +0.3%. Better news is expected in January, with an estimate of 0.4%.
  3. AIG Construction Index: Monday, 22:30. The index has posted four straight readings below the 50-point level, indicative of ongoing contraction. However, the indicator has been moving higher and improved to 47.7 in January. Will the upward trend continue in the February report?
  4. Cash Rate: Tuesday, 3:30. The benchmark rate is expected to remain at 1.50%, where it has been pegged since August 2016. The markets will be keeping a close eye on the rate statement, which should be treated as a market-mover.
  5. Chinese Trade Balance: Wednesday, Tentative. China is Australia’s number one trading partner, so key Chinese indicators can have a strong impact on the movement of the Australian dollar. In January, the trade surplus jumped to $355 billion, easily beating the forecast of $295 billion. The markets are braced for a much softer reading in February, with an estimate of $173 billion.
  6. Chinese CPI: Thursday, 1:30. CPI jumped to 2.5% in January, edging above the forecast of 2.4%. The index is expected to soften in February to 1.9%.
  7. Home Loans: Friday, 00:30. Home Loans fell to 0.4% in December, short of the forecast of 1.0%. The market is expecting a downturn in January, with an estimate of -0.9%.

AUD/USD Technical Analysis

AUD/USD opened the week at 0.7668 and quickly climbed to a high of 0.7708. The pair reversed directions and dropped to a low of 0.7542 late in the week, as support held at 0.7513 (discussed last week). AUD/USD closed the week at 0.7593.

Live chart of AUD/USD:

Technical lines from top to bottom:

We start with resistance at 0.8066.

0.7938 is next. This line has held in resistance since May 2015.

0.7835 was the high point in April 2016.

0.7691 is the next line of resistance.

0.7513 is providing support. This line was a cushion in April 2015.

0.7427 is next.

0.7311 marked a low point in November.

0.7223 is the final support level for now.

I am bearish on AUD/USD

The Trump administration’s first month in office has been beset by difficulties, and there could be more trouble ahead. Still the US economy is doing well and growing optimism over a March rate hike is bullish for the US dollar.

Our latest podcast is titled March hike, Macron, and Mario Draghi

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Safe trading!

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