AUD/USD Weekly Forecast Dec. 19-23, 2011, Fundamental Analysis

The AUD/USD pair dropped heavily last week reaching its lowest level in two weeks, where the US dollar advanced sharply against higher-yielding currencies such as the Aussie with the risk aversion dominating the FX market.

The latest RBA decision to cut the interest rate to 4.25% reduced demand for the Australian dollar. While the RBA will release its Board meeting minutes for December, which will show the reasons behind cutting the interest rate.

The RBA’s meeting minutes will affect Aussie which mainly will continue its downside movement against the US dollar, as the current policy makers’ vision for the Australian economy is comfortable with the current interest rate levels.

On the other hand, the U.S. economy will release its GDP numbers for the third quarter, where expectations refer to steady growth at 2.0%, while the US dollar remains the main focus in the FX market nowadays due to the high levels of uncertainty regarding the global outlook.

The EU sovereign debt crisis is still in the picture, where the latest development from the ECB and EU summit did not reflect any acceptance from investors, who still expect the worst to come for the EU region.

Major highlights for this week that will affect the AUD/USD pair’s trading:

Monday December 19:

Both economies are not due to release any major fundamentals leaving the focus on the market sentiment.

Tuesday December 20:

On Tuesday at 23:30 GMT (Monday), the Australian economy will issue the Conference Board Leading Index for October which had a previous reading of 0.1%.

At 00:30 GMT, the Reserve Bank of Australia will release the Board’s December meeting minutes, where the central bank will announce its reasons behind its last rate cut.

The U.S. economy will release the Housing Starts for November at 13:30 GMT, where it’s expected to show a rise of 0.3% to 630 thousand compare to the prior drop of 0.3%.

As for the U.S. Building Permits it’s expected to drop 1.4% to 635 thousand from 653 thousand.

Wednesday December 21:

On Wednesday at 23:30 GMT (Tuesday), Australia will release the Westpac Leading Index for October, where the previous reading was down by 0.3%.

The U.S. economy will release the Existing Home Sales for November at 15:00 GMT and it’s expected to advance 2.4% to 5.09 million from 4.97 million.

Thursday December 22:

The U.S. economy will release the final GDP reading for the third quarter at 13:30 GMT, the annualized Gross Domestic Product for the third quarter is expected to remain unrevised at 2.0%.

The Personal Consumption for the third quarter is also expected steady at 2.3% as well as the Core Personal Consumption Expenditure to hold at 2.0%.

The U.S. economy will also issue its weekly initial claims, where the number of people filing for first-time claims for the state unemployment insurance dropped to 366 thousand last week.

At 14:55 GMT, the United States will issue the University of Michigan Confidence for December, where the previous reading was 67.7 and it’s expected to rise to 68.2.

The U.S. leading index for November will be released at 15:00 GMT and expected to slow to 0.3% from 0.9%.

Friday December 23:

On Friday at 13:30 GMT, the U.S. economy will release the Durable Goods Orders for November with a previous reading of –0.7% and it’s expected to come at 2.1%.

The Personal Income for November is expected to slow to 0.3% from 0.4%, while the Personal Spending is expected to come at 0.4% from the previous 0.1%.

The core Personal Consumption Expenditure for November is expected in line with the previous rise of 0.1% on the month and 1.7% on the year.

At 15:00 GMT, the U.S. economy will issue the New Home Sales for November, where it’s expected to rise 1.8% to 313 thousand from 307 thousand.