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Forex - AUD/USD weekly outlook: October 21 - 25

ForexOct 20, 2013 08:17AM ET
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This article has already been saved in your Saved Items - The Australian dollar ended Friday’s session at a 19-week high against its U.S. counterpart, after upbeat Chinese economic data eased fears over the strength of the recovery in the world's second-largest economy and amid speculation that the Federal Reserve will hold off on scaling back monetary stimulus in the aftermath of the U.S. government shutdown.

AUD/USD hit 0.9677 on Friday, the pair’s highest since June 4; the pair subsequently consolidated at 0.9676 by close of trade on Friday, up 0.43% on the day and 2.17% higher for the week.

The pair is likely to find support at 0.9526, the low from October 17 and resistance at 0.9759, the high from June 4.

The Aussie was boosted on Friday after official data showed that China’s economy expanded at an annual rate of 7.8% in the third quarter, in line with expectations and up from 7.5% in the three months to June.

A separate report showed that industrial production in China rose by an annualized rate of 10.2% in September, exceeding expectations for a 10.1% increase, after a 10.4% rise the previous month.

The Asian nation is Australia’s largest trade partner.

Meanwhile, in the U.S., Congress passed a bill to reopen the government and raise the debt ceiling on Thursday, with just hours to spare ahead of a deadline to avert an unprecedented sovereign debt default.

The deal will fund the government until January 15 and raise the government borrowing limit until February 7, but the possibility of another debt crisis down the road lingered, as the temporary solution does not resolve the underlying budgetary issues dividing Republicans and Democrats.

Market participants speculated that the impact of the government shutdown on the already fragile economic recovery would prompt the Fed to the delay plans for scaling back its stimulus program until at least the start of next year.

Elsewhere, in Australia, the minutes of the Reserve Bank of Australia's October policy meeting showed that the central bank was in no hurry to cut interest rates further, saying that previous rate cuts are affecting the nation's economy.

The RBA left interest rates unchanged at 2.5% at its last meeting, but it has slashed rates by 225 basis points over the past two years.

In the week ahead, U.S. data releases will be in focus after the shutdown delayed the release of some key economic reports.

The Department of Labor is to publish the September nonfarm payrolls report on Tuesday and data on durable goods orders is to be published on Friday.

Market players have closely been looking out for U.S. data reports recently to gauge if they will strengthen or weaken the case for the Fed to reduce its bond purchases.

The central bank is scheduled to meet October 29-30 to review the economy and assess policy.

Traders also looked ahead to key Australian inflation data as well as a report on Chinese manufacturing activity.

Ahead of the coming week, has compiled a list of these and other significant events likely to affect the markets.

Monday, October 21

The U.S. is to release private sector data on existing home sales, a leading indicator of demand in the housing sector.

Tuesday, October 22

The U.S. is to publish the September nonfarm payrolls report, which had been originally scheduled for release on October 4.

Wednesday, October 23

Australia is to publish an index of leading economic indicators as well as data on consumer price inflation.

Thursday, October 24

China is to release the preliminary reading of the HSBC manufacturing index.

The U.S. is to release the weekly report on initial jobless claims, as well as data on new home sales.

Friday, October 25

The U.S. is to round up the week with data on durable goods orders, a leading indicator of production, as well as revised data on consumer sentiment from the University of Michigan.

Forex - AUD/USD weekly outlook: October 21 - 25

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