AUD/USD outlook – 2012/10/16

October 15, 2012 in Forex Analysis

AUD/USD has seen some recovery and today we will just talk about various facts which may influence the price action in the coming days. We will try to look into various fundamental facts as well as technical ones.

Economy and Fundamentals:

Some Facts:

China’s consumption of the overall  global seaborne iron ore (ore shipped from exporting countries to other countries) is 65% and 40% of copper consumption.

On the opposite side Australia and Brazil come at the top as exporters by satisfying 72% of demand of the seaborne iron ore. As far as Copper is concerned, Australia again is one of the top 6 copper producers in the world.

The prices of commodity respond to the growth in China strongly. An estimation is that 1% drop in China’s growth lay lead to 1.5 point drop in the commodity prices during the coming couple of quarters.

Overall Australia’s economy depend a lot on the strength or weakness of the world’s emerging market where infrastructure growth is still a long way to go.

An Outlook of Emerging Markets:

The power engines to drive the world economy after 2009 economic crisis were the emerging markets which have seen a much faster growth than the developed and industrialized nations. The growth we have been seeing in the recent years seems to be seeing it’s weaker days.

The consensus is that China’s GDP growth has gone down from 7.6% to 7.4%. The year on year change in GDP is scheduled to be released on October 18th. India’s inflation is at 10 months’ high and according to IMF (International Monetary Fund) the economic growth during 2012 would be 4.9% which is quite less than the previous projections of 6.2%. The Brazil is facing the issue with a very strong currency. The Brazilian Real (BRL) is at it’s 3 years’ high against USD.

Overall not a pretty picture, right?

Now let’s have a look at the technical side, mainly from the AUD/USD price action point of view.

AUD/USD Weekly Chart October 16, 2012:

AUD/USD dropped below the 200-day Moving Average.

AUD/USD weekly chart - Drop below 200 day moving average

After the previous attempt to break 200-day Moving average when AUD/USD did not sustain the break and had recovered immediately, the break of the same support last to last week seems to be sustaining and 200-day Moving Average seems to have become a resistance level now.

AUD/USD Daily Chart- Short-term channel:

AUD/USD daily chart October 16 2012- still inside the channel

Even with the recent recovery the currency pair is still within the short-term channel as shown in the daily chart of AUD/USD above.

AUD/USD – The Double Top:

AUD/USD daily chart - October 16 2012 - double top pattern

We can see a good double top chart formation on the daily chart. The neck level support was already broken briefly. If the pattern holds true as it is generally expected to do then it again indicates further decline.

AUD/USD Short Term:

AUD/USD hourly chart October 16 2012 - still inside the channel

The hourly chart shows that the very short-term channel is still not broken with upside moves.

AUD/USD – What To Expect:

Well, we just wanted to take the stock of various factors. Overall we we look into everything, a further deeper decline in the coming days seem to be quite probable.


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