Outlook for AUD/USD during the upcoming week

Australian dollar extended daily losses against its US counterpart on trading Friday and registered a weekly loss for the first time in four weeks, after prices of iron ore, Australia’s largest export, dropped.

Having fallen to a daily low at 0.8952 at 14:20 GMT, AUD/USD closed at 0.8978 on Friday, losing 0.31% for the day, while recording a 0.63% weekly loss, or the first drop since the week ended on January 24th. Support was likely to be found at February 20th low, 0.8937, while resistance was to be met at February 20th high, 0.9020.

Prices of iron ore declined 1.2% in two days to reach 122.90 USD per metric ton on Thursday, data compiled by The Steel Index Ltd. revealed. Total inventory of iron ore at ports in China, monitored by Shanghai Steelhome Information Technology Co., rose to 100.3 million tons during the week ended on February 14th, or the highest level since March 2010.

Meanwhile, in the United States, the number of existing homes sold dropped considerably in January, which implied that housing market was still experiencing the adverse influence of both high mortgage rates and severe weather conditions. According to data by the National Association of Realtors (NAR), existing home sales in the country decreased 5.1% in January compared to a month ago to reach the annualized 4.62 million units. The indicator recorded a fifth drop in the past six months, while at the same time home sales reached their lowest level in 18 months.

Experts had anticipated that existing home sales will fall less, to 4.68 million units in January, following 4.87 million homes sold in December. Analysts suggested that the combination of weaker supply and stronger demand in nations housing sector led to a jump in home values.

On Thursday the Bureau of Labor Statistics in the United States said in a report that the index of consumer prices rose 0.1% in January compared to a month ago, in line with analysts’ estimates and after the index gained 0.2% in December. The annualized consumer price inflation came in at 1.6% last month, matching the median experts’ forecast and following a 1.5% increase in December.

The number of initial jobless claims in the country were reported to have fallen by 3 000 to 336 000 during the week ended on February 15th, while preliminary estimates pointed a decrease to 335 000 claims.

On Wednesday the minutes of Federal Reserve Bank’s policy meeting on January 28th-29th showed several policy makers said that in “the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor” of continuing to pare back the central bank’s monthly monetary stimulus by 10 billion USD at each meeting.

As the rate of unemployment decreases at a faster than expected pace, even while other labor-market indicators signal weakness, bank’s policy makers agreed that it would “soon be appropriate” to revise their guidance about the time horizon of record-low borrowing costs.

During the week ahead investors attention will be focused on the US durable goods orders and revised Gross Domestic Product reports.

AUD/USD may be influenced by a number of reports and/or events scheduled during the next week as follows:

On Monday (February 24th) no relevant events are expected from both Australia and the United States.

On Tuesday (February 25th) the Conference Board research group is to announce the results of its survey on consumer confidence for the United States in February. A separate report by S&P and Case-Shiller will show the annualized home prices in 20 large US cities during December.

On Wednesday (February 26th) the Building Activity Survey and Engineering Construction Survey are to reveal data on construction work done in Australia during the final quarter of 2013 compared to the third quarter.

The United States will report on new home sales in January.

On Thursday (February 27th) a report will show quarterly private capital expenditures in Australia in Q4 2013. This indicator is of certain importance, as it may provide early signals for nations economic activity in the future.

The United States is expected to release the weekly report on initial jobless claims, an indicator for lay-offs in the country, accompanied by the closely watched report on durable goods orders in January, a key indicator for production activity.

On Friday (February 28th) Australia is expected to release data regarding private sector lending in January.

At 13:30 GMT the United States will announce the revised annualized value of its Gross Domestic Product during the final quarter of 2013, which is the widest indicator for activity of economic subjects in the country.

At 14:45 GMT the US will release the results of the business survey in February, which encompasses entities operating in the region of Chicago.

At 14:55 GMT the University of Michigan in cooperation with Thomson Reuters will announce the final reading of their index of consumer confidence also in February.

At 15:00 GMT the National Association of Realtors (NAR) will publish data regarding pending home sales in January, an indicator for future housing sector activity in the United States.