What Trends Can We Expect From The Australian Dollar

The Australian dollar recently declined somewhat against the US dollar as it closed at 0.7003. In the morning session, economic data revealed that December’s reading for business confidence dropped to 3.0, which was 2.0 points lower than the reading in November 2015 of 5.0. Other negative factors include the decline in the business conditions index from 10.0 in November 2015 to 7.0 in December 2015. The AUD/USD currency pair is likely to hit a support level of 0.6981, but if it breaks through that support level, it could move as low as 0.6947. Resistance is holding steady at 0.7049 and if that level is breached, the AUD/USD pair could hit 0.7082. There are several economic data releases slated for this week, including the inflation data on Wednesday, 27 January 2016.

Here are some of the consensus forecasts for upcoming economic releases in Australia this week:

On Thursday, 28 January 2016, export and import data will be revealed

On Friday, 29 January 2016, producer price index and private sector credit data will be announced:

The aforementioned data may appear to be positive overall, but the inflation rate in Australia has actually slowed during Q4, 2015 from a figure of 0.5% previously. This indicates a weakening in overall economic activity, brought upon by China weakness and slack global demand. However, the year-on-year inflation rate for Q4, 2015 is actually higher by 0.1% than the previous inflation rate. This indicates that overall increases in inflation, while positive, are trending bearish. This will naturally impact on the AUD in a negative way as long as China weakness, the commodity price rout and a strong USD persist.