The Australian dollar managed to stabilize amid OK data. A very busy week awaits the Aussie, including a rate decision and the GDP data. Here are the highlights of the week and an updated technical analysis for AUD/USD.
Data coming out of Australia was mostly positive: private capital expenditure came out as expected but came with a small upwards revision. Building approvals already beat expectations outright. China’s manufacturing PMI picked up in November. However, this was not enough to tackle the rising US dollar: a potent mix of data, including GDP, consumer confidence, and new home sales, joined an upcoming tax reform and upbeat comments from Fed officials.
AUD/USD daily graph with support and resistance lines on it. Click to enlarge:
MI Inflation Gauge: Monday, 00:00. The Melbourne Institute fills in the gap for the government that publishes the official CPI only once per quarter. MI showed that inflation was up 0.3% in October and it is likely to be slower this time.
Company Operating Profits: Monday, 00:30. Profits of companies are quite volatile in Australia. A jump of 6% in Q1 was followed by a fall of 4.5% in Q2. This time, we can expect a small rise: 0.3% is on the cards.
ANZ Job Advertisements: Monday, 00:30. The ANZ bank publishes the change in the number of jobs advertised on various media outlets. In October, they reported a rise of 1.4%, compensating for a drop beforehand.
AIG Services Index: Monday, 22:30. The Australia Industry Group has shown that the services sector is slowing down. The indicator dropped to 51.4 points in October, down from 52.1 but at least still above the 50-point mark that separates expansion from contraction.
Current Account: Tuesday, 00:30. Australia’s current account is in deficit for quite a long time. A wider-than-expected deficit of 9.6 billion was recorded in Q2 2017 and the publication included a downwards revision for Q1. A deficit of 8.8 billion is forecast.
Retail Sales: Tuesday, 00:30. The monthly retail sales report fell short of expectations in the past three months. Contrary to forecasts for a rise of 0.4%, the volume of sales remained flat in September. Will we see an increase in October? The release has a significant impact on the Aussie. A small increase of 0.3% is estimated.
Rate decision: Tuesday, 3:30. The Reserve Bank of Australia has not changed its interest rate since last cutting it to 1.50% in August 2016. This is the last decision of the year and the RBA does not meet in January. They are not expected to make any change now. However, lower inflation and the recent stabilization of the A$ could trigger some kind of a dovish hint from the team led by Phillip Lowe and his colleagues.
GDP: Wednesday, 00:30. The land down under publishes its GDP report relatively late: over two months after the quarter ends. Nevertheless, they do it only once, and with no revisions. giving it a bigger impact. The economy expanded by 0.8% in Q2 2017, up from only 0.3% in Q1. We may get a slower growth rate for Q3: 0.7% is forecast.
AIG Construction Index: Wednesday, 22:30. The second weekly publication from AIG has shown a slowdown also in the construction sector, 53.2 points in October, down from higher levels. We may see another slide now.
Trade Balance: Thursday, 00:30. Contrary to the wider trade balance measure, Australia’s trade balance has been in positive territory during 2017. A surplus of 1.75 billion was seen in September. A surplus of 1.41 billion is projected.
Home Loans: Friday, 00:30. The number of home loans squeezed by 2.3% in September, much worse than expected and ending a winning streak of rises during 5 months. Yet another fall is expected now: 1.8%.
Chinese Trade Balance: Friday, 3:00. The economic giant is also Australia’s No. 1 trade partner. A surplus of 38.2 billion USD was seen in October, slightly lower than expected. A bigger worry for Australia comes from Chinese imports: these include Australia’s metal exports. A surplus of 34.9 USD is on the cards.
AUD/USD Technical Analysis
The Aussie was limited under the 0.7640 level (mentioned last week) and extended its falls from there.
Technical lines from top to bottom:
The psychological round level of 0.80. Below, we find 0.7940, which capped the pair in August.
0.7860 served as support during September and is another line to watch. 0.7785 was a stepping stone on the way up.
Below, we find 0.7730, that was a high point in June 2017 and also beforehand, working as resistance in November. 0.7640 worked as resistance in November.
0.7595 was a swing high in early December and capped the pair. 07550 provided support in late November.
0.7530 is the cycle low, very close to the previous line and the last stop before the round number of 0.75.
Even lower, we find 0.7440 and then 0.7375.
I remain bearish on AUD/USD
While the RBA is unlikely to make any changes, but it could try to lower the Aussie. Unless GDP growth is extraordinary, the downward pressure on the Aussie is likely to continue.
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