Forex Analysis – of the Day: AUD/USD 3rd November 2014

Australia – Building Approvals

The Asian session would be pretty calm in the Foreign Exchange market as it is a bank holiday in Japan. However, there are some important data releases that would likely create considerable impact throughout the day.

At GMT 12:30 a.m., the Australian Bureau of Statistics released the national month-over-month building approvals figure, which measures the changes in the number of approvals of new buildings. Since a build permit indicates new construction work, it suggests that there would be additional positive economic activities. For example, new jobs would be created for construction workers. Therefore, market analysts consider this data regarding new building approvals to be a leading indicator of the overall economic health of the country.

Last month, the building approvals figure went up by 3.0% and this month the forecast was set at a modest 0.9% decline. However, the actual figure came out at negative 11.0%. It was a very disappointing news for the Australian economy.

United States – ISM Manufacturing Purchasing Managers’ Index

Later in the afternoon, the US based Institute for Supply Management will release its purchasing managers’ index (PMI) that measures the level of a diffusion index. This index is based on a survey of 400 purchasing managers who rate the relative level of the business environment in the country on the issues of employment, price level, production situation, new orders, existing inventories, etc.

Since the purchasing managers usually the latest insight about their businesses, the collective perception of the purchasing managers in the country acts as a leading indicator of the overall economy. Hence, market analysts and participants consider the ISM’s PMI figure to be a vital fundamental data.

Last month, the ISM Manufacturing Purchasing Managers’ Index figure came out at 56.6, and this month the forecast is set at 56.5. During the last several months, the index reading ranged between 55.4 and 59, indicating a stable level of optimism regarding the US economy. There is a high chance that this month there would not be any major surprise as well.

Trade Recommendation for the AUD/USD

Chart AUDUSD, D1, 2014.11.03 07:41 UTC

After the collapse of the AUD/USD price during September, the pair finally found a sustained support around the 0.8640 level. In the last few weeks, the AUD/USD also formed an upward sloping trend line during its retracement. It is now trading in a tight range between the resistance zone around 0.8850 and the trend line.

Today, amid the worse than expected Australian building approvals figure, the AUD/USD unexpectedly fell and tested the trend line. However, so far, the trend line seems to be holding the selling pressure. If the US ISM PMI figure comes out as expected, the AUD/USD is likely to continue trading within this narrow range. However, an ISM PMI reading above 60 will certainly push the price below the trend line. If the daily candle closes below the 0.8700 level, it would suggest a PUT in the AUD/USD.

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About our Forex Analyst:  Asif Imtiaz

Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes on various tech and financial topics. You can reach him at contact@asifimtiaz.com

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Asif Imtiaz

Asif worked as a prop trader for almost a decade, and later he managed trading operations for one of the largest foreign exchange strategy developers in Europe. Currently, he works as a trading consultant to several brokers and writes on various tech and financial topics. You can reach him at contact@asifimtiaz.com

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