AUD/USD had an uneventful week and posted modest gains. This week’s highlights are Retail Sales and the Cash Rate. Here is an outlook on the major market-movers and an updated technical analysis for AUD/USD.
There were no major Australian releases last week. The Aussie steadied last week, as global markets digested the stunning Brexit vote. In the US, GDP posted came in at 1.1%, beating the estimate of 1.0%. The week wrapped up on a positive week, as ISM Manufacturing PMI beat expectations.Updates:
AUD/USD graph with support and resistance lines on it. Click to enlarge:
- MI Inflation Gauge: Monday, 1:00. This monthly indicator helps analysts track CPI, which is released every quarter. In June, the indicator posted a decline of 0.2%, marking a 3-month low.
- Building Approvals: Monday, 1:30. This key indicator has posted three straight gains, beating the estimate each time. The markets are expecting a strong turnaround in the May release, with an estimate of -3.6%.
- AIG Services Index: Monday, 23:30. The index improved to 51.5 points in June, pointing to slight expansion in the services sector. This was only the second reading pointing to expansion since October 2015.
- Retail Sales: Tuesday, 1:30. Retail Sales is the primary gauge of consumer spending and can have a strong effect on the movement of AUD/USD. The April reading posted a gain of 0.2%, shy of the forecast of 0.3%. The estimate for the May release stands at 0.3%.
- Trade Balance: Tuesday, 1:30. Australia’s trade deficit narrowed to A$1.58 billion, lower than the estimate of A$2.11 billion. The deficit is expected to rise to A$1.72 billion in the May report.
- Cash Rate: Tuesday, 4:30. The RBA is not expected to change the benchmark rate, with the national election last week. Currently the rate stands at 1.75%. The RBA will publish its decision with a rate statement.
- RBA Assistant Governor Guy Debelle Speaks: Wednesday, 7:30. Debelle will deliver remarks at an event in Sydney. The markets will be looking for clues regarding the RBA’s future monetary policy.
- AIG Construction Index: Wednesday, 23:30. The index continues to register readings below the 50-point level, pointing to contraction in the construction sector. The index dipped to 46.7 points in the May release.
* All times are GMT
AUD/USD Technical Analysis
AUD/USD opened the week at 0.7426 and touched a low of 0.7318, testing support at 0.7334 . The pair then changed directions and climbed to a high of 0.7503 and closed the week at 0.7470.
Technical lines from top to bottom:
0.7835 has provided resistance since April.
0.7692 is protecting the 0.77 line.
0.7597 is the next line of resistance.
0.7438 has switched to support role following gains by AUD/USD.
0.7334 was a cap in December 2015. This line was tested in support last week.
0.7192 is providing strong support.
0.7105 has been a cushion since the end of February. It is the final support level for now.
I am bearish on AUD/USD
In the US, monetary policy is not expected to be hawkish and a rate hike appears doubtful. The markets will have to deal with the new Brexit reality, and continuing instability in the markets could weigh on the Aussie.