AUD/USD has been in free-fall, as the Aussie has fallen by over 6 percent in each of the past two weeks. Currently, the pair is trading just above the 0.58 line. There are three events in the upcoming week. Here is an outlook at the highlights and an updated technical analysis for AUD/USD.
After reducing rates to 0.50% in early March, the RBA trimmed rates to 0.25%. This move is aimed at shoring up the struggling economy but at the same time has made the Aussie less attractive to investors. Preliminary retail sales bounced back in February with a gain of 0.4%, after declining by 0.3% a month earlier. On the employment front, the economy created an impressive 26.7 thousand jobs in February, up from 13.5 thousand in January. The unemployment rate fell from 5.3% to 5.1%.
In the U.S., the Federal Reserve slashed rates at the start of the week, from 1.25% to 0.25 percent. This emergency cut was in response to the meltdown in the financial markets. Later in the week, the Fed announced it was establishing a Commercial Paper Funding Facility, in order to keep credit flowing to the economy. On the manufacturing front, the Empire State Manufacturing Index plunged by -21.5 points, compared to the forecast of +5.1 points. Core retail sales fell by 0.4%, while retail sales declined by -0.5%.
- Flash Manufacturing PMI: Monday, 22:00. The index has been in contraction territory for the past five months, with readings below the 50-level. The February reading improved to 49.8, up from 49.1 a month earlier. We now await the March data.
- Flash Services PMI: Monday, 22:00. The PMI dipped to 48.4 in February, down from 48.9 in the previous release. This points to contraction in the services sector. Will we see an improvement in March?
- CB Leading Index: Wednesday, 14:30. The index came in at a flat 0.0% in December, indicative of weak economic conditions. Will we see a decline in January?
AUD/USD Technical Analysis
Technical lines from top to bottom:
0.6150 switched to a resistance role early in the week.
The round number of 0.6000, which has psychological significance, is next.
0.5900 is in an unfamiliar role as a resistance line, following sharp losses by AUD/USD last week.
0.5800 is currently an immediate support line.
0.5710 is protecting the round number of 0.5700.
0.5580 is the final support level for now.
I remain bearish on AUD/USD
The coronavirus has caused a financial meltdown across the globe. With risk apprehension at sky-high levels, the outlook for risk currencies like the Aussie is poor, as investors snap up the safe-haven greenback.