Forex - AUD/USD weekly outlook: January 27 - 31

Investing.com - The Australian dollar tumbled to the lowest level since July 2010 against its U.S. counterpart on Friday, as surprisingly weak Chinese manufacturing data and a selloff in emerging markets dampened demand for growth-linked assets.

AUD/USD fell to 0.8660 on Friday, the pair’s lowest since July 19, 2010, before subsequently consolidating at 0.8683 by close of trade, down 0.97% for the day and 1.1% lower for the week.

The pair is likely to find short-term support at 0.8631, the low from July 19, 2010 and resistance at 0.8774, Friday’s high.

Market sentiment was hit by concerns over a slowdown in China after data on Thursday showed that the preliminary reading of the HSBC manufacturing index fell to a six-month low in January.

The Asian nation is the world’s second largest economy and Australia’s biggest export partner.

Meanwhile, a selloff in emerging markets accelerated on Friday, after the Turkish lira fell to the latest in a series of record lows against the dollar. South Africa’s rand, the Russian ruble and the Argentine peso all fell to multi-year lows against the greenback.

Emerging market currencies have been hard hit since the Federal Reserve announced plans last month to begin scaling back its asset purchase program.

The Aussie came under additional pressure after a Reserve Bank of Australia board member said Friday that a value of around USD0.80 would be a “fair” level for the currency.

The Australia dollar was also sharply lower against the yen on Friday, with AUD/JPY plunging 1.84% to hit a four-month low of 88.88 at the close.

Data from the Commodities Futures Trading Commission released Friday showed that speculators increased their bearish bets on the Australian dollar in the week ending January 21.

Net shorts totaled 64,584 contracts, up 19.5% from the previous week’s total of 51,988 net shorts. Gross long Australian dollar positions rose by 5,269 contracts to 15,645 last week, while gross short positions increased by 17,935 contracts to 80,229.

In the week ahead, Wednesday’s outcome of the Federal Reserve’s monthly meeting will be in focus amid expectations for a reduction to USD65 billion from the current USD75 billion in the bank’s stimulus program.

The policy-meeting will mark the last for outgoing Fed Chairman Ben Bernanke, as current Vice Chair Janet Yellen prepares to take over.

In addition, the initial estimate of U.S. fourth quarter gross domestic product is reported on Thursday.

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

Monday, January 27

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

Tuesday, January 28

Australia is to publish private sector data on business confidence, a leading indicator of economic health.

The U.S. is to release data on durable goods orders, a leading indicator of production, as well as what will be a closely watch report on consumer confidence.

Wednesday, January 29

The Federal Reserve is to announce its federal funds rate and publish its rate statement.

Thursday, January 30

Australia is to release data on import prices, while China is to publish the revised reading of the HSBC manufacturing PMI.

The U.S. is to publish preliminary data on fourth quarter economic growth. The nation is also to release the weekly report on initial jobless claims and data on pending home sales.

Friday, January 31

Australia is to produce reports on producer price inflation and private sector credit.

The U.S. is to round up the week with a report on manufacturing activity in the Chicago region, revised data on consumer sentiment and a report on personal spending.