Outlook for AUD/USD during the upcoming week

Australian dollar extended its daily advance against the US counterpart on trading Friday, following mixed economic data released out of the United States, which showed industrial output shrank in January, while consumer sentiment remained unchanged in mid-February.

Having touched fresh daily highs at 0.9044 at 8:46 GMT, AUD/USD closed at 0.9035 on Friday, rising 0.61% for the day and also recording a 0.51% weekly gain. Support was likely to be received at February 13th low, 0.8928, while resistance was to be met at February 12th high, 0.9068.

According to official data released on Friday, the index of industrial production, which gauges output in US manufacturing, utilities and mining sectors, decreased 0.3% in January compared to December, marking its first monthly drop since July 2013. Experts had anticipated that industrial production will expand 0.2% in January, after it increased 0.3% in December.

The capacity utilization rate in nations industry dropped 0.4% to 78.5% in January, while preliminary estimates pointed to a rate of 79.3%.

A separate survey, conducted by Thomson Reuters and the University of Michigan, showed that US consumers retained their optimism regarding nations economic development in the middle of February. The preliminary reading of the corresponding index of consumer confidence came in at 81.2, which confirmed the final value reported in late January. The median estimate of experts pointed that the index will probably slow down to a reading of 80.5 this month. This data suggested that consumers might be able to increase their spending, after severe winter in January adversely influenced their expenditures.

The sub-index of economic expectations rose in February, marking its highest reading during the past six months.

On Thursday the greenback came under pressure, as a report by the US Census Bureau showed seasonally adjusted retail sales fell 0.4% in January, while the median forecast of experts pointed to a flat performance. December’s retail sales have been revised down to a 0.1% dip from a 0.2% gain previously.

Meanwhile, the Aussie received support after the Chinese National Bureau of Statistics reported on Friday, that the annualized index of consumer prices in worlds second largest economy rose to 2.5% in January, which outstripped preliminary estimates, pointing to an inflation rate of 2.3%. In monthly terms, consumer prices rose 1.0% in January, again exceeding forecasts of a 0.7% gain.

At the same time, the annualized index of producer prices in China dropped 1.6% in January, while experts had anticipated a larger rate of decrease, 1.7%. China is Australias largest export partner.

It also became clear that Goldman Sachs Group Inc. now forecasts that AUD/USD will probably drop to 0.8800 in a six-month period and to 0.8500 in a twelve-month period.

During the week ahead investors attention will be focused on the minutes of Federal Reserve Banks most recent policy meeting and the report on US consumer price inflation for January.

AUD/USD may be influenced by a number of reports, scheduled for publication during the upcoming week as follows:

On Monday (February 17th) markets in the United States are to remain closed due to a federal holiday honoring the birthday of the first President of the country, George Washington.

Australia is expected to release data on new auto sales in January, an indicator for consumers confidence in their future financial prospects.

On Tuesday (February 18th) the Reserve Bank of Australia will publish the minutes of its most recent meeting on policy.

The United States is to announce the results in a survey, encompassing manufacturers in the area of New York. The corresponding index probably slowed down to 9.50 in February from 12.51 in the preceding month.

On Wednesday (February 19th) the Conference Board research group will announce its Leading index for Australia. Short-term and intermediate-term forecasts, regarding nations economic growth, are usually based on this index.

The Bureau of Labor Statistics in the United States is to report on producer prices in January, followed by data regarding housing starts and building permits also in January.

At 19:00 GMT the Federal Reserve Bank will publish the minutes of its policy meeting, conducted on January 28th-29th.

On Thursday (February 20th) the United States will release its weekly report on initial jobless claims, an indicator for lay-offs in the country, followed by data regarding the index of consumer prices in January. The annualized consumer inflation probably accelerated to 1.6% last month from 1.5% in December.

Markit Economics is expected to report on the preliminary reading of its manufacturing PMI for the United States in February.

At 15:00 GMT the Federal Reserve will announce the results in its survey, encompassing manufacturers in the region of Philadelphia.

On Friday (February 21st) the National Association of Realtors (NAR) will release a report on existing home sales in the United States in January, an indicator for current housing market conditions.