AUD/USD: Current 0.8928 (Sunday, Aug 14, 2010).

Trend: Correction during the upward movement.

Outlook: Volatile Sideways with some bearish outlook.

Please refer daily charts and not short-term charts e.g. hourly charts.

Fundamentals (Recent economic releases):

1) AU: Home Loans release negative as compared to the previous release as well as the expectations.
2) AU: National Australia Bank's Business Conditions and Business Confidence releases negative as compared to the previous releases.
3) AU: Westpac Consumer confidence data much less than the previous release.
4) AU: Unemployment Rate release negative as compared to the previous release as well as the expectations.
5) AU: Employment Change data though better than the expectations but much less than the previous release.
6) AU: Elections in August. This should keep a check on AUD.

7) US: Monthly Budget Statement release though slightly better than the expectations but much less as compared to the previous release.
8) US: Consumer Price Index (CPI) data better than previous release.
9) US: Retail Sales releases showed less than expected data but much better than the previous releases.
10) US: Economists at Morgan Stanley reduced their estimate for third-quarter consumer spending (Consumer Spending: 70% of the US economy).
11) US: unemployment rate close to a 26-year high.

Technicals and Market Perception:

1. Daily MACD line crossed below the signal line.
2. ADX: +DI line crossed below –DI line.
3. A very weak selling signal from Ichimoku cloud chart.

Analysis:  Global weak economic picture which always reduces carry trades as well as some political uncertainties (because of upcoming elections in Australia) should keep AUD in check for some time. Our outlook is for a volatile sideways movement with a bearish touch.

AUD/USD found strong resistance at 09220 and fell. We would expect some support near 0.8875 -Fibonacci retracement level 1 of the upward movement which took place from June 30th. If that support is broken then we would expect a downward movement towards0.8775 (Fibonacci level 2 retracement).  If AUD/USD breaks the support at 0.8775 also then 0.8633 level would be sensitive. A break below may take AUD/USD further down to retest 0.8316 level.

On the upside we expect 0.9220 to keep the resistance level.  Overall till Australia elections are over and the effect of the results settle down, we will not be entering a serious position for AUD/USD.

Approach: We will be avoiding longer-term positions currently and will be taking short-term positions with tighter stop-losses.

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 For short term Forex trades, please refer to daily technical analysis for AUD/USD.

(Please note that the color (colour) codes used to show outlook are for the currency pairs and not any individual currency)