AUD/USD Weekly Fundamental Analysis October 1-5, 2012 Forecast

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Introduction:  The Australian dollar still isn’t in its good old days, but the performance is definitely improving. Resistance lines tend to work in a smoother manner than support lines, but they also work well. The pair move well together, not much volatility, but easy to chart and easy to trade with low risk factors

Weekly Analysis and Recommendation:

The AUD/USD declined to close the week at 1.0378 after hitting a high earlier in the day of 1.0474.  The dollar is headed into the weekend higher against nearly all of its major counterparts as stocks and commodities look to close out an otherwise strong third quarter with a loss.  Investors are acutely focused on disappointing manufacturing numbers out of the US this morning, with Chicago PMI unexpectedly falling to 49.7 from 53.0.  With a reading below 50 denoting contraction, the number shrunk for the first time since 2009.  Following yesterday’s weak reading of Q2 GDP, investors are fearful that manufacturing will contribute less to economic growth than original hoped for. 

Date

Last

Open

High

Low

Change %

Sep 28, 2012

1.0378

1.0437

1.0474

1.0366

-0.57%

Sep 27, 2012

1.0437

1.0371

1.0459

1.0364

0.64%

Sep 26, 2012

1.0371

1.0362

1.0378

1.0329

0.09%

Sep 25, 2012

1.0362

1.0421

1.0462

1.0359

-0.57%

Sep 24, 2012

1.0421

1.0435

1.0436

1.0387

-0.12%

The Reserve Bank of Australia (RBA) will meet on Tuesday and while interest rate expectations have declined recently, we expect the Bank to remain on hold but deliver a dovish statement. RBA minutes from the September meeting noted that “the current assessment of the inflation outlook continued to provide scope to adjust policy in response to any significant deterioration in the outlook for growth”. This suggests an easing bias however in our view despite somewhat softer growth, the Bank is likely to pause for now and continue to monitor incoming data.

Since the last policy meeting, data has shown that GDP growth slowed to 0.6% q/q in 2Q from the prior 1.4%, the trade deficit has widened to -556M in July from -227M, and home loans have fallen. The unemployment rate unexpectedly fell to 5.1% in August from 5.2%; however this was a result of a drop in the participation rate to by 0.2%

Weak Chinese economic activity and falling commodity prices have also increased RBA rate cut expectations. At the same time expectations of stimulus from China is growing. As China is Australia’s largest trading partner, easing by the People’s Bank of China (PBoC) would be supportive for the Australian economy. As monetary policy conditions have eased across the globe, this may reduce some of the immediate external risks to the RBA’s outlook.

Action taken by other central banks around the world have seen tail risks recede which have given a boost to the AUD as a high beta currency. Minutes of the last RBA meeting noted that, “members discussed the possibility that the high level of the exchange rate was weighing more heavily on the economy than might be expected”. AUD/USD is only marginally higher than at the September 4 policy meeting, but this is still likely to be a concern for the Bank.

FxEmpire provides in-depth analysis for each currency and commodity 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 recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Major Economic Events for the week of September 24-28, 2012 actual v. forecast for Yen, the Aussie, the Kiwi and USD

Date

Currency

Event

Actual

Forecast

Previous

 Sep. 25

USD

CB Consumer Confidence 

70.3

63.0 

61.3 

 

NZD

Trade Balance 

-789M

-606M 

97M 

Sep. 26

NOK

Norwegian Unemployment Rate 

3.00%

3.00% 

3.10% 

 

MXN

Mexican Trade Balance 

-0.980B

-0.556B 

-0.427B 

 

USD

New Home Sales 

373K

380K 

374K 

Sep. 27 

USD

Core Durable Goods Orders (MoM) 

-1.6%

0.3% 

-1.3% 

 

USD

Durable Goods Orders (MoM) 

-13.2%

-5.0% 

3.3% 

 

USD

Initial Jobless Claims 

359K

378K 

385K 

 

USD

GDP (QoQ) 

1.3%

1.7% 

1.7% 

 

USD

Continuing Jobless Claims 

3271K

3285K 

3275K 

 

USD

Pending Home Sales (MoM) 

-2.6%

-0.7% 

2.6% 

 

NZD

Building Consents (MoM) 

1.9%

3.0% 

2.0% 

 Sep. 28 

JPY

Tokyo Core CPI (YoY) 

-0.4%

-0.3% 

-0.5% 

 

JPY

Industrial Production (MoM) 

-1.3%

-0.5% 

-1.0% 

 

JPY

Retail Sales (YoY) 

1.8%

-0.2% 

-0.8% 

 

USD

Core PCE Price Index (MoM) 

0.1%

0.1% 

0.1% 

 

USD

Personal Spending (MoM) 

0.5%

0.5% 

0.4% 

 

USD

Chicago PMI 

49.7

53.0 

53.0 

 

USD

Michigan Consumer Sentiment 

78.3

79.0 

79.2 

Historical: From 2010 to present

Highest: 1.1080 USD on Jul 27, 2011

Average: 0.9898 USD over this period

Lowest: 0.8067 USD May 25, 2010

 

Economic Highlights of the coming week that affect the AUD, JPY, NZD and USD

Date

Time

Currency

Event

Forecast

Previous

Oct. 01

00:50

JPY

Tankan Large Manufacturers Index 

-3

-1

 

15:00

USD

ISM Manufacturing Index 

49.8

49.6

Oct. 02

05:30

AUD

Interest Rate Decision 

3.50%

3.50%

Oct. 03

02:30

AUD

Trade Balance 

-0.70B

-0.56B

Oct. 04

02:30

AUD

Building Approvals (MoM) 

4.7%

-17.3%

 

02:30

AUD

Retail Sales (MoM) 

0.4%

-0.8%

Government Bond Auction

Date Time Country 

Oct 01 10:00 Norway 

Oct 02 09:15 Austria 

Oct 02 09:30 Belgium 

Oct 02 09:30 UK 

Oct 02 14:30 UK 

Oct 03 09:10 Sweden 

Oct 03 10:00 Norway 

Oct 04 08:30 Spain 

Oct 04 08:50 France 

Oct 04 15:00 US 

Oct 05 15:30 Italy 

 

 

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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