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A pretty light week ahead for the Aussie, which only has one major economic report due over the next couple of days. Here are the potential catalysts!

Australia’s retail sales (Jan 11, 12:30 am GMT)

Will Australia’s retail industry see a third consecutive monthly growth this week? Analysts are expecting a 0.4% uptick after already seeing a 0.5% increase in October.

Take note that Amazon entered the Australian jungle in late November. And though blokes and sheilas are still getting used to the retail giant, it would be interesting to see if its entrance has affected the already stiff retail competition.

China’s CPI and trade balance data

Last week the New Zealand dollar got boosts after China printed strong manufacturing and services PMIs. And with no economic release on tap save for the building consents due on Jan. 11 at 9:45 PM GMT, we might see Kiwi dance to the tune of China’s CPI (Jan 10, 1:20 AM GMT) and trade balance (Jan 12) reports.

China’s annual inflation is expected to grow by 1.9% after seeing a 1.7% growth in November. It’s also expected to show a trade surplus of $37.44B in December – a dip from November’s $40.21B figure – despite the holiday season. Take note that significant hits or misses could set the tone for NZD’s intraday trading.

U.S. FOMC VOTING member speeches

Last week the FOMC meeting minutes release saved the dollar from its intraweek losses. See, Yellen and her gang weren’t as dovish as expected since “a few participants” are considering a faster pace of tightening throughout 2018 than implied by their official December statement.

They were also pretty excited about Trump’s fiscal stimulus plan, saying that it could lead to “a steeper path of increases in the target range.” And no, they weren’t talking about golf.

This week we’ll hear from Fed members Raphael Bostic (Jan 8, 5:40 PM GMT), John Williams (Jan 8, 6:35 PM GMT), and William Dudley (Jan 11, 8:30 PM GMT). All three are voting members in 2018, so y’all better watch their speeches closely!

Chart to Watch: AUD/USD

AUD/USD Daily Forex Chart
AUD/USD Daily Forex Chart

After seeing strong growth over the past weeks, AUD/USD is having trouble breaking above the .7850 – .7900 area of interest.

An upside breakout could pave the way for a move towards the .8000 previous highs, while a bounce lower from the resistance level could drag it back down to the .7700 or even .7500 previous support levels.

Last week’s price review

The markets were closed on January 1, so the first trading week of the year is shorter than usual. With that said, the Aussie is currently on course to closing out the week on a mixed note, which means that the Aussie was vulnerable to opposing currency price action this week.

Overlay of AUD Pairs & Gold (Black Line): 1-Hour Forex Char
Overlay of AUD Pairs & Gold (Black Line): 1-Hour Forex Char


And as you can see on the overlay of AUD pairs above, Aussie pairs generally took directional cues from gold prices, which were on the rise this past week partially because of Greenback weakness.

However, there were also instances when the Aussie decoupled or even diverged from gold prices.

The first instance occurred when markets opened on Tuesday since gold only steadily rose then but the Aussie shot up like a rocket. And as noted in Tuesday’s Asian session recap, this was likely due to the strong Chinese manufacturing PMI numbers from Markit/Caixin (51.5 vs. 50.7 expected, 50.8 previous).

Moving on, the second instance is when Aussie pairs diverged from gold prices during Tuesday’s late Asian/morning London session since gold prices steadily climbed higher but the Aussie weakened broadly.

And as I mentioned in Tuesday’s London session recap, the Aussie very likely weakened because of the risk-off vibes during the European session, as well as disappointment over the slump in the RBA’s commodity prices index (-5.9% vs. -4.0% previous).

Moving right along, the third instance happened during Thursday’s U.S. session since gold recovered (and then some) after dipping during the morning London session, but the Aussie had a mixed price action. Incidentally, the Aussie’s mixed price action during this period is the main reason why the Aussie’s performance is also a bit mixed this week. There’s no clear reason why the Aussie was vulnerable to opposing currency price action at the time, however.

Anyhow, the final instance happened earlier when gold edged higher but the Aussie encountered selling pressure after Australia’s November trade report not only failed to deliver on an expected surplus, but actually printed a deficit to boot (-$0.63B vs. +$0.55B expected).

Moreover, the previous month’s $0.11B surplus was revised to show a $0.30B deficit. Ouch! Not good at all. It’s therefore no real wonder why the most Aussie pairs moved lower a full hour before gold prices did.