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AUD/USD Fundamental Forecast – May 26, 2016

By:
James Hyerczyk
Updated: May 25, 2016, 10:26 UTC

The AUD/USD traded higher most of the session, getting its support from short-covering and profit-taking tied to technically oversold conditions. The

AUD/USD Fundamental Forecast – May 26, 2016

The AUD/USD traded higher most of the session, getting its support from short-covering and profit-taking tied to technically oversold conditions. The Forex pair finished at .7198, up 0.0016 or +0.22%.

On Tuesday, the Aussie broke sharply after Reserve Bank of Australia governor Glenn Stevens hinted that another rate cut to a fresh record low of 1.5 percent could be on the horizon. Earlier today, it was reported that Australian construction activity weakened sharply in the first quarter, extending on declines seen in 2015. Official data from the Australian Bureau of Statistics revealed a seasonally adjusted 2.6 percent slump in total construction work done in the three months to March 31.

Today’s price action suggests short-sellers are not interesting in pursuing that direction aggressively at current price levels. Although the fundamentals are bearish, this is not perceived as a value area for bearish traders. They would like to see the market at higher price levels in order to initiate fresh short positions. In addition, current short players are anxious to book profits after the prolonged break. This could lead to aggressive profit-taking and aggressive short-covering.

It may not be a stronger Australian Dollar that fuels a rally today, but a weaker U.S. Dollar. If the Greenback starts to lose upside momentum today then look for the Aussie to rally.  If the U.S. Dollar posts another strong rally then the Australian Dollar should weaken, but don’t expect a volatile move to the downside.

Trader reaction to the bearish construction report earlier also suggests that the AUD/USD may have run out of aggressive sellers and is ripe for a counter-trend rally.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Today’s economic releases:

Cur. Event Actual Forecast Previous
  USD API Weekly Crude Oil Stock -5.137M -3.300M -1.140M
  USD API Weekly Cushing Crude Oil Stock -0.189M -0.950M 0.508M
  NZD Trade Balance (MoM) (Apr) 292M 60M 117M
  NZD Trade Balance (YoY) (Apr) -3,660M -3,940M -3,380M
  AUD Construction Work Done (QoQ) (Q1) -2.6% -1.5% -3.6%
  EUR GfK German Consumer Climate (Jun)   9.7 9.7
  EUR German Business Expectations (May)   100.8 100.4
  EUR German Current Assessment (May)   113.2 113.2
  EUR German Ifo Business Climate Index (May)   106.8 106.6
  EUR EU Finance Ministers Meeting      
  USD Goods Trade Balance (Apr)   -60.10B -56.90B
  USD FOMC Member Harker Speaks      
  USD Services PMI (May)   53.1 52.8
  CAD Interest Rate Decision   0.50% 0.50%
  USD Crude Oil Inventories   -2.450M 1.310M
  USD Cushing Crude Oil Inventories     0.461M
  USD FOMC Member Kashkari Speaks      
  USD FOMC Member Kaplan Speaks      
  AUD Private New Capital Expenditure (QoQ) (Q1)   -3.0% 0.8%

30-Minute AUD/USD

Upcoming Economic Events that you should be monitoring:

Thursday, May 26, 2016

Cur. Event Actual Forecast Previous
  GBP BBA Mortgage Approvals   44.8K 45.1K
  GBP Business Investment (QoQ) (Q1)   0.1% -2.0%
  GBP GDP (YoY) (Q1)   2.1% 2.1%
  GBP GDP (QoQ) (Q1)   0.4% 0.4%
  USD FOMC Member Bullard Speaks      
  USD Core Durable Goods Orders (MoM) (Apr)   0.3% -0.2%
  USD Durable Goods Orders (MoM) (Apr)   0.5% 1.3%
  USD Initial Jobless Claims   275K 278K
  AUD RBA Assist Gov Debelle Speaks      
  USD Pending Home Sales (MoM) (Apr)   0.6% 1.4%
  USD FOMC Member Powell Speaks      
  AUD RBA Assist Gov Debelle Speaks      
  JPY National Core CPI (YoY) (Apr)   -0.4% -0.3%
  JPY Tokyo Core CPI (YoY) (May)   -0.4% -0.3%

Government Bond Auctions

May 25 11:03 Sweden Sek 1bn 3.5% 2022 & Sek 3bn 1% 2026 bonds

May 25 11:05 Norway Holds bond auction

May 25 11:30 Germany Eur 1bn 2.5% Jul 2044 Bund

May 25 19:00 US Holds 5Yr Notes Auction, 2Yr FRN

May 26 11:10 Italy Announces details of bond auction

May 26 11:10 Italy Holds Zero-coupon/BTPei auction

May 26 17:20 Sweden Details of I/L auction on Jun 02

May 26 19:00 US Holds 7Yr Notes Auction

May 30 11:10 Italy Holds bond auction

Jun 01 10:30 Denmark Holds bond auction

Jun 01 11:30 Germany Eur 4bn Apr 2021 Bobl

Jun 01 11:30 UK 1.5% 2021 Gilt

Jun 01 17:20 Sweden Announces details of bond auction on Jun 08

Jun 02 10:30 Spain Holds bond auction

Jun 02 11:03 Sweden Holds I/L bond auction

Jun 02 11:50 France Holds bond auction

 

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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