Yesterday’s trade saw AUD/USD within the range of 0.6907-0.7002. The pair closed at 0.6996, surging 0.58% on a daily basis. It has been the 2nd gain in the past 11 trading days. The daily low has been the lowest level since September 7th, when a low of 0.6893 was registered.
At 10:19 GMT today AUD/USD was losing 1.48% for the day to trade at 0.6881. The pair touched a daily low at 0.6872 at 9:30 GMT, overcoming the lower range breakout level (S4), and a daily high at 0.7002 during the early hours of the Asian trading session. The daily low has been the lowest level since April 1st 2009, when a low of 0.6859 was reached. Support may be received within the 0.6860-0.6875 area and then – in the area around the low from March 31st 2009 (0.6794). Resistance, on the other hand, may be seen at the hourly 21-period EMA (0.6939), then – at the hourly 55-period EMA (0.6960) and finally – at the hourly 100-period EMA (0.6979).
On Friday AUD/USD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United States
Retail sales
Retail sales in the United States probably remained unchanged in December on a monthly basis, according to the median forecast by experts. In November sales were up 0.2%, after a 0.1% increases in the previous two months.
Among the 13 major categories, 8 registered growth, 4 showed declines and 1 showed no change. In November, the largest increases in sales were reported for clothing stores (+0.8%), sporting goods, hobby, book & music stores (+0.8%), food and beverages stores (+0.7%), general merchandise stores (+0.7%), miscellaneous store retailers (+0.7%), food and services drinking places (+0.7%), electronic appliance stores (+0.6%) and non-store retailers (+0.6%).
On the other hand, in November, retail sales dropped at furniture stores (-0.3%), building material and garden equipment and supplies dealers (-0.3%), motor vehicle & parts dealers (-0.4%), and gasoline stations (-0.8%).
Sales at health and personal care stores remained unchanged during the same month, according to the report by the US Census Bureau.
Annualized retail sales surged 1.4% in November, following a 1.7% climb in October. Novembers rate of increase has been the slowest one since April 2015, when retail sales rose 1.3% year-on-year.
US core retail sales, or retail sales ex autos, probably went up 0.2% in December compared to a month ago, following a 0.4% climb in November. The latter has been the sharpest monthly rate of increase since July 2015, when core sales surged 0.4% as well. This indicator removes large ticket prices and historical seasonality of automobile sales.
In case the general index of sales showed a better-than-projected performance in December, this would have a strong bullish effect on the US dollar. The official report is due out at 13:30 GMT.
Producer Price Index
Annual producer prices in the United States probably fell for an 11th month in a row in December, by 1.0%, according to the median estimate by experts. If so, this would be the smallest annual drop since August 2015, when prices fell 0.8%. In November the annualized Producer Price Index (PPI) dropped 1.1%. It reflects the change in prices of over 8 000 products, sold by manufacturers during the respective period. The Producer Price Index (PPI) differs from the Consumer Price Index (CPI), which measures the change in prices from consumer’s perspective, due to subsidies, taxes and distribution costs of different types of manufacturers in the country. In case producers are forced to pay more for goods and services, they are more likely to pass these higher costs to the end consumer. Therefore, the PPI is considered as a leading indicator of consumer inflation. In case annual producer prices fell at a lesser rate than anticipated, this would have a moderate bullish effect on the US dollar.
The nation’s annualized core producer price inflation, which excludes prices of volatile categories such as food and energy, probably decelerated to 0.3% in December from 0.5% in the prior month. The latter has been the fastest annual surge in the core PPI since September 2015. The Bureau of Labor Statistics is expected to report on the official PPI performance at 13:30 GMT.
Industrial Production Index
Industrial output in the United States probably shrank for a fifth straight month in December, going down at a monthly rate of 0.2%, according to market expectations. In November industrial production contracted 0.6% from a month ago, or at the steepest monthly rate since March 2015.
In November activity in the US mining sector shrank 1.1% compared to a month ago, with a greater part of this decline being attributable to considerable decreases for coal mining and for oil and gas well drilling and servicing. The gauge for utilities registered a 4.3% monthly drop in November, as unusually warm weather conditions weighed on demand for heating.
Manufacturing production, which accounts for almost three quarters of total industrial production, remained flat in November. Production of non-durable goods expanded 0.5%, while production of durable goods shrank 0.2% during the month. At the same time, the gauge for other manufacturing industries (publishing and logging) declined 1.7%.
A larger-than-projected monthly decline in the index would usually have a moderate bearish effect on the US dollar. The Board of Governors of the Federal Reserve is to release the production data at 14:15 GMT.
Reuters/Michigan Consumer Sentiment Index – preliminary reading
The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States improved for a fourth successive month in January. The preliminary reading of the corresponding index, which usually comes out two weeks ahead of the final data, probably rose to 93.0 during the current month from a final reading of 92.6 in December. The latter came above the preliminary reading of 91.8, which was reported on December 11th. If expectations were met, Januarys reading would be the highest since July 2015, when a level of 93.1 was reported.
The sub-index of current economic conditions advanced to a final reading of 108.1 from a preliminary 107.0 in December, after a month ago it stood at 104.3.
The sub-index of consumer expectations came in at a reading of 82.7, up from a preliminary value of 82.0 in December, but lower compared to a final reading of 82.9, registered in November.
Participants in the December survey expected that the rate of inflation will be at 2.6% during the next year, or unchanged compared to the preliminary release, but down from a rate of 2.7% as expected in November.
In case the gauge of consumer sentiment increased at a steeper pace than projected in January, this would have a moderate-to-strong bullish effect on the greenback. The preliminary reading is due out at 15:00 GMT.
Bond Yield Spread
The yield on Australian 2-year government bonds went as high as 1.992% on January 14th, after which it closed at 1.967% to lose 5.8 basis points (0.058 percentage point) compared to January 13th. It has been the first drop in the past four trading days.
The yield on US 2-year government bonds climbed as high as 0.931% on January 14th, after which it closed at 0.903% to lose 1.2 basis points (0.012 percentage point) compared to January 13th. It has been the 14th drop in the past 22 trading days and also a third consecutive one.
The spread between 2-year Australian and 2-year US bond yields, which reflects the flow of funds in a short term, narrowed to 1.064% on January 14th from 1.110% on January 13th. The January 14th yield spread has been the lowest one since January 11th, when the difference was 1.045%.
Meanwhile, the yield on Australian 10-year government bonds soared as high as 2.731% on January 14th, after which it slid to 2.702% at the close to lose 8.9 basis points (0.089 percentage point) compared to January 13th. It has been a second consecutive drop.
The yield on US 10-year government bonds climbed as high as 2.122% on January 14th, after which it slipped to 2.100% at the close to add 0.009 percentage point compared to January 13th. It has been the 8th gain in the past 22 trading days.
The spread between 10-year Australian and 10-year US bond yields narrowed to 0.602% on January 14th from 0.700% on January 13th. The January 14th yield difference has been the lowest one since January 11th, when the spread was 0.571%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for AUD/USD are presented as follows:
R1 – 0.7005
R2 – 0.7013
R3 (range resistance) – 0.7022
R4 (range breakout) – 0.7048
S1 – 0.6987
S2 – 0.6979
S3 (range support) – 0.6969
S4 (range breakout) – 0.6944
By using the traditional method of calculation, the weekly pivot levels for AUD/USD are presented as follows:
Central Pivot Point – 0.7068
R1 – 0.7187
R2 – 0.7421
R3 – 0.7540
S1 – 0.6834
S2 – 0.6715
S3 – 0.6481
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