Forex Market: AUD/USD trading outlook for November 23rd

Friday’s trade saw AUD/USD within the range of 0.7181-0.7251. The pair closed at 0.7240, soaring 0.63% on a daily basis, while extending the gains from Thursday. The daily high has been the highest level since October 27th, when a high of 0.7262 was registered. In weekly terms, AUD/USD appreciated 1.53%, while marking its second consecutive week of advance and also the sharpest one since the week ended on October 11th, when the pair added 4.09% to its value.

On Monday (November 23rd) AUD/USD trading may be influenced by a number of macroeconomic reports as listed below.

Fundamentals

United States

Manufacturing PMI by Markit – preliminary reading

Manufacturing activity in the United States probably slowed down in November, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 52.9, according to market expectations. If so, this would be the lowest reading since October 2013, when the PMI was reported at 51.8. In October the final seasonally adjusted PMI stood at 54.1, improving from a preliminary 54.0.

According to Markits statement: ”New export sales continued to rise at only a modest pace in October, with survey respondents noting that the strong U.S. dollar remained a headwind to growth. Nonetheless, the latest rise in new work from abroad was the third in the past four months, and the fastest since September 2014.”

”Despite rising levels of incoming new work and an upturn in job creation, manufacturers remained relatively cautious in terms of their inventories of finished goods. Reflecting this, post-production stocks were lowered for the third month running and at the fastest pace since June 2014. At the same time, manufacturers sought to boost their stocks of purchases during October, with some citing expectations of rising workloads in the months ahead. Although only modest, the latest increase in pre-production inventories was the sharpest for almost a year.”

”Manufacturers continued to benefit from falling commodity prices in October, with survey respondents widely commenting on reduced costs for steel and other metals. Measured overall, the latest fall in average cost burdens was the fastest since March. Meanwhile, manufacturers indicated that their factory gate charges rose only fractionally, with the rate of inflation the second-slowest for over three years.”

Values above the key level of 50.0 indicate optimism (expanding activity). In case the flash manufacturing PMI showed a worse-than-anticipated performance, this would have a moderate bearish effect on the US dollar. The preliminary PMI reading by Markit Economics is due out at 14:45 GMT.

Existing home sales

The index of existing home sales in the United States probably fell 1.98% to a level of 5.44 million in October compared to September, according to the median estimate by experts. In September sales were 4.7% higher from a month ago to reach 5.55 million, or the highest level since May 2010, when a figure of 5.66 million was reported. September sales were boosted by a 5.3% surge in sales of single-family houses. At the same time, sales of condos remained flat during the period. The median sale price climbed 6.1% in September compared to the same month a year ago.

In case the index dropped at a steeper monthly rate than anticipated, this would have a limited bearish effect on the US dollar. The National Association of Realtors (NAR) is to release the official figure at 15:00 GMT.

US Core CPI may exceed 2% in 2016 according to Bullard

On Friday Fed President for St Louis, James Bullard noted that US consumer inflation may reach the inflation target of 2%. According to Bullard, in case oil price remains steady at its current level, while all other CPI components continue rising at their current rates, the Core Consumer Price Index could exceed the 2% target by the end of 2016.

Correlation with other Majors

Taking into account the week ended on November 22nd and the daily closing levels of the currency pairs involved, we come to the following conclusions in regard to the strength of relationship:

AUD/USD to NZD/USD (0.9331, or very strong)
AUD/USD to USD/CHF (0.3393, or moderate)
AUD/USD to EUR/USD (0.1321, or weak)
AUD/USD to GBP/USD (0.1276, or weak)
AUD/USD to USD/CAD (0.1082, or weak)
AUD/USD to USD/JPY (-0.7847, or strong)

1. During the examined period AUD/USD moved strongly in the opposite direction compared to USD/JPY.

2. AUD/USD moved almost equally in one and the same direction with NZD/USD during the past week.

3. The correlation between AUD/USD and EUR/USD, AUD/USD and GBP/USD, AUD/USD and USD/CAD was insignificant during the period in question.

Daily and Weekly Pivot Levels

By employing the traditional calculation method, the Monday pivot levels for AUD/USD are presented as follows:

Central Pivot Point – 0.7224
R1 – 0.7267
R2 – 0.7294
R3 – 0.7337

S1 – 0.7197
S2 – 0.7154
S3 – 0.7127

By using the traditional method of calculation again, the weekly pivot levels for AUD/USD are presented as follows:

Central Pivot Point – 0.7186
R1 – 0.7305
R2 – 0.7370
R3 – 0.7489

S1 – 0.7121
S2 – 0.7002
S3 – 0.6937