AUD/USD Weekly Fundamental Analysis June 25-29, 2012, Forecast

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 ended a difficult week trading at 1.0064 almost at parity. The USD soared back to life at the end of the week after the FOMC decisions. The AUD was already weakened by the “repositioning” of the Chinese economy, after HSBC PMI numbers disappointed. The RBA has done all it could with the rate reduction, but contagion from Europe and China, are pressuring all commodity currencies.

This week saw the ending of the G20 conference, where global leaders dealt with the EU crisis and chided the EU leader for lack of leadership and resolve. The G20 amassed a sum of money to dedicate to fostering growth around the globe.

Also the ECB said this week that it was going to inject some funds to helping stimulate growth.

In Oz the numbers weren’t bad, it was just the strenght of the USD and the risk aversion mode combined with the negativity flowing from the EU and the global slowdown caused by the EU crisis.

Asian markets should generally follow the global tone with two possible exceptions.  One is the risk of nearer-term action by China’s central bank.  Liquidity conditions have tightened meaningfully in China over the past month, with the CHIBOR rates quoted on Bloomberg indicating that markets are starved for cash and expecting the PBOC to do something about it over the next month or two. The 200bps move in overnight CHIBOR (China’s LIBOR) since May (see left side of chart) could well prompt the PBOC to act either via liquidity operations in markets or even possibly outright policy moves, although we think that a reserve ratio cut in July — after the PBOC can gauge how funding conditions look after quarter end — is the most likely path. Second is that Japan issues its major monthly economic releases.  Japanese industrial production is expected to post the sharpest month-over-month decline in over a year while the highest frequency inflation gauges for Tokyo are expected to post ongoing deflation in both headline and core prices excluding food and energy. Retail sales, total household spending, housing starts, and the jobless rate will round out the broad picture for the Japanese economy.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthlyanalysis 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 June 19-23, 2012 actual v. forecast

Historical:

Highest: 1.1080USDon Jul 27, 2011

Average: 0.9126 USD over this period

Lowest: 0.6007USD Oct 27, 2008

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

Upcoming Government Bond Auctions

Date Time Country 

Jun 25  09:10  Norway

Jun 25  09:30  Germany

Jun 25  10:00  Belgium

Jun 25  15:30  Italy

Jun 26  00:30  Japan

Jun 26  08:30  Holland

Jun 26  08:30  Spain

Jun 26  09:10  Italy

Jun 26  09:30  UK

Jun 26  14:30  UK

Jun 26  17:00  US

Jun 27  09:10  Italy

Jun 27  09:10  Sweden

Jun 27  17:00  US

Jun 28  09:10  Italy

Jun28  17:00  US