Focus On Very Important AUD Economic Calendar Events - 1st Week Of 2015

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Includes: FXA
by: FX Analyst

Summary

Light week with 2 important events only.

Private sector credit and commodities price are the highlights of the week but unlikely to have strong performance.

Overall bearish on the AUD but short term strength is possible.

This would be the start a new series of weekly articles informing investors about the upcoming events on the economic calendar for the major currencies. In this article, I would bring my focus to the currency of the Australian Dollar (AUD). This article is meant to be a short and sharp article that would inform readers what events to look out for in the following week and why they are important.

I would categorize these events into 'Very Important', 'Important' and 'Marginal' and would include a brief analysis of the past results for the very important data. For a detailed analysis of the currency, please refer to my other articles as it is not the focus of this article. The very important events are likely to have a high impact on the currency, hence they are scrutinized. For the important events, the impact is lesser unless there is a surprise or the magnitude of change is much greater or lesser than expected. For the marginal events, it is not expected to move the currency much and a glance at it will do.

Overview of AUD Events

The first week of 2015 will be a light week for the AUD. There will be no very important events which is the focus of this series of weekly articles so there will be no detailed write-up on them. There will also be no marginal events but we will have 2 important events as seen below.

Important Events To the AUD

Number

Event

Date of Event

Time of Event (GMT)

1

Private Sector Credit m/m

31.Dec.2014

12:30PM

2

Commodity Prices y/y

02.Jan.2015

5:30AM

Credit and commodities prices are two very important elements of the Australian economy and we shall over them briefly in this article. Private sector credit is an important driver of economic growth and it has increased by 0.6% in November 2014 and the market is expecting a slightly slower growth of 0.5%. The Reserve Bank of Australia being a careful regulator and is aware of the damage of the unrestrained credit as seen in the US previously, we are unlikely to see a huge increase in credit that will shake the AUD bearishness.

As for commodities, we know that Australia is a significant commodities producer and this has been both a blessing and a curse for them. For blessing, it has insulted Australia from the worst of the Great Recession in the 2008 to 2009 period as China took this chance to expand its infrastructure. Australia benefited by exporting commodities to China. Now that China is targeting a slower and more 'sustainable' growth of 7.5%, they are demanding less of commodities and we see a sustained slide in commodities prices for the past 31 months with November 2014 decline of 18.6%. As there is no signs of higher growth in China, we can expect a continued decline for December 2014.

Overview of the Strength of AUD

We can see from the CurrencyShares Australian Dollar Trust ETF (NYSEARCA:FXA) chart below to gauge the strength of the AUD. The FXA tracks the performance of the AUD net of expenses of 0.41% and it is listed on the New York Stock Exchange in United States Dollars. The FXE is liquid with $248.00 million of market capitalization and last daily transaction volume of 38,236. This volume is reduced due to the Christmas and New Year holiday effect and volume is expected to improve by the second week of 2015.

The daily chart of the FXA above shows that it is currently heavily oversold. Hence there is reason to believe that the AUD will have a slight retracement in the first week of 2015. In fact, we might be about to witness a golden cross in the Moving Average Convergence Divergence (MACD) indicator. However I am still overall bearish on the AUD in the long term even when I am mildly bullish on the AUD in the short term.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.