Aussie Dollar Setting up for Further Upside Gains

Last week saw a volatile Australian Dollar, as the pair experienced some sharp swings after some mixed US economic results, as well as an AUD Employment Change result that was disappointing. However, the pair is now setting up for a bullish push with price action having entered a support zone.

The Aussie Dollar had an exceedingly volatile week as the currency was whipsawed by a range of economic data from both the US and China. Chinese trade figures showed some significant weakness as their imports deteriorated significantly. Given Australia’s reliance upon exports to China, the result could impact the Australian economy sharply. The pair initially declined over 140 pips but was buoyed the following day by a weak US Core Retail Sales result at -0.3% which saw the AUD swinging the other way. Subsequently, the pair closed out the trading week around the 0.7265 mark.

The week ahead holds some critical data as both the US Unemployment Claims and Chinese economic figures are due. It is likely that the market will be closely following any disappointing data out of China especially given the Australian economy’s exposure to the Asian power house. In fact, the CNY Industrial Production were just been released and point to a slowing production sector at 5.7% y/y (6.0% exp). The Chinese HSBC Flash Manufacturing PMI is due later in the week and will be critical for the AUD moving forward.

From a technical perspective, price action has declined to rest upon the short term bullish trend-line as well as below the 100-Day moving average. RSI has declined, but still remains relatively flat within the neutral zone. The 12 and 30EMA’s still indicate bullishness and subsequently our bias remains to the long side.

Support is found at 0.7195, 0.7031, and 0.6905 whilst resistance is found at 0.7382, 0.7438, and 0.7554.