AUD/USD Weekly Forecast Dec. 12-16, 2011, Fundamental Analysis

The AUD/USD pair dropped significantly last week to relinquish the previous gains, as the current market sentiment and the Australian economy outlook did not support Aussie against the greenback.

The Reserve Bank of Australia cut interest rate by 25 basis points to 4.25%, as inflation retreated during the last period which helped the central bank to move for further easing to support growth amid the global economic uncertainty and rising downside pressures.

On the other hand, the unemployment rate in Australia during November increased to 5.3% from the previous 5.2%, where the economy cut 6.3 thousand jobs for the first time in three months.

On the other hand, EU leaders’ summit in Brussels added to the volatility after they reached an according for a new intergovernmental pact after UK blocked the treaty change and also provided 200 billion euros for the IMF to fight the crisis which still was not major for markets yet also was not a total disappointment and this week the market will continue to react on the measures.

The AUD/USD pair is expected to drop further, as the risk aversion reduced demand for the higher-yielding currencies opening the way for the pair to drop, while the latest Australian fundamentals did not offer any support for the Aussie.

Major highlights for this week that will affect the AUD/USD pair’s trading:

Monday December 12:

On Monday at 00:30 GMT, the Australian economy will release Home Loans for October which is expected to remain flat after rising 2.2% the previous month.

At the same time, the Trade Balance for October will be released and expected to show a narrowing trade surplus of A$2000 million from A$2564 million.

The U.S. economy will release the Monthly Budget Statement for November at 19:00 GMT where the deficit is expected to wider to $150 billion from $98.5 billion.

Tuesday December 13:

On Tuesday at 00:30 GMT, Australia will issue NAB Business Confidence for November, which had a previous reading of 2, while the NAB Business Condition had a prior reading of –1.

The United States will release the Advance Retail Sales Index for November at 13:30 GMT where it is expected with 0.6% rise after 0.5%.

The U.S. Business Inventories for October will be released at 15:00 GMT where it’s expected to come at 0.3% from the previous reading of 0.0%.

At 19:15 GMT, the Federal Reserve Bank will announce the Federal Open Market Committee Rate Decision, where the central bank is expected to keep the rate steady near zero.

Wednesday December 14:

On Wednesday at 23:30 GMT (Tuesday) Australia will release the Westpac Consumer Confidence for December, where it had a previous reading of 6.3%, while the Westpac Consumer Confidence Index had a prior reading of 103.4.

At 13:30 GMT, the U.S. economy will release the Import Price Index for November where it is expected to rise by 0.9% after 0.3% drop.

Thursday December 15:

On Thursday at 23:30 GMT (Wednesday) Australia will release the Consumer Inflation Expectation for December, which had a previous reading of 2.5%.

The U.S. economy will release the Producer Price Index for November at 13:30 GMT where it’s expected to come at 0.2% from the previous reading of -0.3%. The annual Producer Price Index is expected to rise to 6.0% from the previous reading of 5.9%.

The U.S. Current Account Balance for the third quarter will be up at 13:30 GMT and the deficit is expected to narrow to $107.7 billion from the previous deficit of $118.0 billion.

The Empire Manufacturing Index for December will be released at 13:30 GMT where it’s expected to come at 2 from the prior reading of 0.61.

At 13:30 GMT, U.S. economy will issue its weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance increased 381 thousand last week.

The Net Long-term TIC Flows for October will be up at 14:00 GMT, where the previous reading was $68.6 billion, as for the Total Net TIC Flows it had a previous reading of $57.4 billion.

The U.S. Industrial Production for November will be released at 14:15 GMT, where it’s expected to come at 0.2% from the previous of 0.7%. The Capacity Utilization for November is expected to come at 77.9% from the prior 77.8%.

The Philadelphia Fed index is due at 15:00 GMT for December and expected to rise to 5.0 from 3.6.

Friday December 16:

On Friday, the U.S. economy will release the Consumer Price Index for November at 13:30 GMT, where the prior reading was down by 0.1% and expected to come at 0.1%. As for the annual reading it’s expected to remain steady at 3.5%.

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