AUD/USD forecast and technical analysis ► preview of the key 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 A$ is a “risk” currency. It tends to rise when stocks and commodities move up and when the global mood improves. It tends to drop when the situation worsens: geopolitical risks increase and the outlook for global demand slumps.
The Aussie’s technical behavior is usually impressive. 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 hard commodities such as copper and iron. We often find a positive correlation between the price of iron ore and the Aussie $. The commodity boom kept Australia out of recession for over 25 years. The land down under enjoyed the resources boom with China leading the demand. While the mining boom has probably peaked regarding growth, the sector still churns out quite a lot, as China has a soft landing.
Risks could arise from the Chinese economy: Australia’s No. 1 trading partner could see a slowdown after the Party Congress in October 2017. Leading into this event, China shows no signs of a slowdown, thus making it hard for the RBA to send the currency lower.
AUD/USD gained 60 points last week, as the pair closed at the 0.7660 line. There are 8 events this week. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.
US job numbers were solid last week. Non-Farm Payrolls were upbeat and wage growth improving to 0.3%, above the estimate of 0.2%. The Fed refrained from raising rates last week, but the policy statement was slightly hawkish, as the Fed gave a thumbs-up to the economy, noting that inflation was moving closer to the Fed inflation target of 2.0%. As expected, the RBA maintained rates at 1.50%.
AUD/USD graph with support and resistance lines on it. Click to enlarge:
AIG Construction Index: Sunday, 22:30. The construction indicator improved to 51.4 in September, compared to 46.6 points in August. Will the upward swing continue in October?
ANZ Job Advertisements: Monday, 00:30. This employment indicator declined 0.3% in September, well of the August pace of a 1.8% gain. The markets are hoping for a positive reading in August.
NAB Business Confidence: Tuesday, 00:30. The indicator has shown solid growth in the past two months, with readings of +6 points. This monthly release does not have as much impact as the quarterly release, which also came in at +6 points in the third quarter.
Chinese Trade Balance: Tuesday, Tentative. Key Chinese indicators can have a significant impact on the Australian dollar, as China is Australia’s largest trading partner. China’s trade surplus sagged in September to $278 billion, well off the forecast of $365 billion. The indicator is expecting a strong turnaround in October, with an estimate of $366 billion.
Westpac Consumer Sentiment: Tuesday, 23:30. An improvement in consumer confidence often translates into stronger consumer spending, which is critical for economic growth. In September, the indicator gained 1.1%.
MI Inflation Expectations: Thursday, 00:00. This indicator helps analysts predict actual inflation levels. The indicator improved to 3.7% in September, marking a 4-month high.
Home Loans: Thursday, 00:30. Home Loans provides a snapshot of the level of activity in the housing sector. The indicator has struggled, posting three declines in the past four releases. Another decline is expected in the September reading, with an estimate of -1.5%.
RBA Assistant Governor Guy Debelle Speaks: Friday, 1:00. Debelle will speak at an event in Melbourne. The markets will be looking for clues regarding the RBA’s future monetary policy.
AUD/USD Technical Analysis
AUD/USD opened the week at 0.7595 and quickly touched a low of 0.7582. The pair then reversed directions and climbed to a high of 0.7697, testing resistance at 0.7691 (discussed last week). AUD/USD closed the week at 0.7661.