Forex - AUD/USD weekly outlook: December 12 - 16

Investing.com - The Australian dollar was higher against its U.S. counterpart on Friday, paring some of the week’s losses after European leaders agreed to draft a new treaty for stronger economic integration in the euro zone but gains were limited by sustained concerns over the handling of the region’s debt crisis.

AUD/USD 1.0048 on Friday, the pair’s lowest since November 30; the pair subsequently consolidated at 1.0213 by close of trade on Friday, declining 0.38% over the week.

The pair is likely to find support at 1.0059, the low of November 16 and resistance at 1.0379, the high of December 8.

European leaders agreed to increase the financial backstops to countries with debt problems by channeling EUR200 billion of funds to the International Monetary Fund. However, they postponed decision on increasing the capacity of the European Stability Mechanism until March.

U.K. Prime Minister David Cameron vetoed changes to the EU treaty after failing to secure concessions, meaning new fiscal rules will have to operate as an intergovernmental agreement.

Meanwhile, investors remained cautious amid uncertainty over whether the European Central Bank will now play a bigger role in stabilizing the region’s bond market. 

Earlier Friday, official data showed that the U.S. trade deficit narrowed to USD43.5 billion in November, in line with expectations, from a deficit of USD44.2 billion the previous month.

In a separate report, the University of Michigan said that its index of consumer sentiment rose more-than-expected to 67.7 in November, from 64.1 the previous month.

The greenback found support on Thursday after the U.S. Department of Labor said that the number of people who filed for unemployment assistance in the U.S. last week fell to the lowest level since late February, tumbling to 381,000 after a reading at 404,000 the previous week.

In Australia, official data showed that the unemployment rate rose unexpectedly in November, ticking up to 5.3%, from 5.2% the previous month. Analysts had expected Australia’s unemployment rate to remain unchanged at 5.2% in November.

Earlier in the week, the Reserve Bank of Australia cut its interest rate for the second successive month from 4.50% to 4.25%, citing difficult fiscal conditions, particularly in the euro zone.

In the week ahead, investors will be keeping a close eye on the borrowing costs of troubled euro zone states, as a rise in borrowing costs could prompt a rating cut after Standard & Poor’s warned that it may carry out a mass downgrade of 15 euro zone members, including France, Italy and Spain.

Italy and Spain are both set to auction government bonds in the coming week.
Markets will also be closely watching the Federal Reserve’s policy setting meeting on Tuesday, as concerns over the impact of the euro zone’s financial crisis on global growth continue to weigh.

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

Monday, December 12

Australia is to publish official data on home loans, a leading indicator of demand in the housing market, as well as data on the trade balance.

Also Monday, the U.S. is to publish official data on the federal budget balance.

Tuesday, December 13

Australia is to release official data on housing starts as well as a report on business confidence.

Later Tuesday, the U.S. is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. In addition, the Federal Reserve is to announce its federal funds rate.

Wednesday, December 14

Australia is to publish a report on consumer sentiment, an important indicator of economic health.

The U.S. is to produce official data on import prices and crude oil stockpiles.
Also Wednesday, the Organization of Petroleum Exporting Countries are to meet to discuss a range of issues regarding energy markets, including oil production levels.

Thursday, December 15

Australia is to produce a report on inflation expectations as well as data on new vehicle sales, a leading indicator of consumer confidence.

The U.S. is also to release official data on industrial production, capacity utilization, the current account, TIC long term purchases and manufacturing activity in New York and Philadelphia regions.

Friday, December 16

The U.S. is to round up the week with official data on consumer price inflation, which accounts for the majority of overall inflation.