AUD/USD Weekly Outlook - January 5th to 9th, 2015
AUD/USD had tried to move up but failed at 0.8216, which was near 22-day EMA. The price then broke below the low of the recent range of 0.8088 to touch 0.8078 before closing for the week at 0.8089.
Being a commodity currency the Australian dollar is venerable when ever any negative signs for global economy come into the picture. The U.S. dollar is getting stronger but the sentiments about the euro-zone are quite weak. And either case the Aussie would take hit if it is not just the question of one currency going stronger or weaker but a serious drop of either. The news from the China is also not great. China being the largest export partner of the Australia affects the strength of the Australian dollar directly. The country may be heading for the slowest growth since 1990. India, a close rival, is attracting higher foreign capital inflows under the new Government of the Prime-Minister Narendra Modi and that that also goes a bit against China.
China HSBC manufacturing PMI in December came out to be 49.6 against the previous month's 50.0. The manufacturing PMI released by China Federation of Logistics and Purchasing was 51.1 against the previous month's 51.3. The non-manufacturing PMI stayed same as the previous month at 53.9. There were no economic releases during the past week from the Australia.
The U.S. data showed that the consumer confidence further improved from 91.00 to 92.6 and the pending home sales which grew to 4.1% from previous month's 2.1%. However the month over month construction spending witnessed a decline from 1.2% to -0.3% during the same month. The initial jobless claims from U.S. came out weak with 298K against the previous 281K. Markit manufacturing PMI from the U.S., for December, also came out weaker at 53.9 as compared to previous month's 54.8. ISM manufacturing PMI also witnessed a decline from 58.7 to 55.5 in December
The outlook stays bearish for AUD/USD but the currency pair is in a strong support zone and hence we stay cautious initially, till a break of this support zone takes place.
Since the end of April 2013, any correction of AUD/USD has been finding resistance near the 55-week EMA. For past 16 weeks the trend has been for a resistance near 5-week EMA and the price-action has been mainly staying below this level. The current 5-week EMA is at 0.8972. If we see on the daily chart, the price action is mainly staying below the 5-day EMA and as mentioned above the recent break of that resistance had found resistance near the 22-day EMA. The current 5-day EMA is at 0.8115, the 22-day EMA is at 0.8174 and the 55-day EMA is at 0.8337.
The current price-action is testing the strong support zone of the May and June of 2010's 0.8068 to 0.8083. Some sideways moves cannot be ignored over 0.8068 as, apart from the previous support, this brings in the psychological support of 0.8000 ranges. However, on the upside we expect resistance to hold near 22-days EMA i.e. near 0.8180. If this resistance holds and a break below 0.8068 takes place then further decline will be expected to test the strong psychological support zone of 0.8000 to 0.8020. Any break of that support should extend the decline towards 0.7049 which is the 61.8% retracement of the gains from 0.6013 to 1.1080.
As mentioned above, the pair is in a strong support zone of psychological ranges of 0.8000, the historical support zone of 0.8068 to 0.8083 and also the 61.8% retracement support of the move from 0.6013 to 1.1080. If this support holds and a break above 0.8180 takes place then first a retest of the recent 0.8115 will be expected. Any break above 0.8120 would indicate the possibilities of a near-term bottoming and such a move should extend the consolidation towards the next resistance zone of 0.8337/0.8360 first and maybe higher.
Analyze Yourself - Various views of AUD/USD Price-Action