Forex - AUD/USD weekly outlook: December 30 - January 3

Investing.com - The Australian dollar slumped to a one-week low against its U.S. counterpart on Friday, as indications of an improving U.S. economy fuelled expectations of a further reduction in U.S. monetary stimulus.

AUD/USD fell to 0.8862 on Friday, the pair’s lowest since December 20, before subsequently consolidating at 0.8869 by close of trade, down 0.3% for the day and 0.6% lower for the week.

The pair is likely to find short-term support at 0.8854, the low from December 20 and resistance at 0.8927, Friday’s high.

Trading volumes remained limited as many investors already closed books before the end of the year, reducing liquidity in the market.

Demand for the greenback remained supported amid expectations of further stimulus tapering by the Federal Reserve. The U.S. central bank will start reducing its bond-buying stimulus program by USD10 billion a month in January, amid indications of an improving U.S. economy.

Some market participants believe the Fed will likely reduce its bond purchases by USD10 billion in each of its next seven meetings before ending the program in December 2014, as the U.S. recovery deepens.

Data on Thursday showed that the number of individuals filing for initial jobless benefits declined by 42,000 to a seasonally adjusted 338,000 last week. Analysts were expecting U.S. jobless claims to fall by 35,000 to 345,000 from the previous week’s revised total of 380,000.

In the week ahead, the U.S. is to publish reports on pending home sales, consumer confidence and jobless claims, as investors attempt to gauge the strength of the world’s largest economy.

Trading volumes are expected to remain light, with many markets closed for the New Year’s holiday, reducing liquidity in the market and increasing the volatility.

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

Monday, December 30

The U.S. is to release private sector data on pending home sales, a leading indicator of economic health.

Tuesday, December 31

Australia is to produce data on private sector credit.

Meanwhile, the U.S. is to produce private sector data on consumer confidence and house price inflation, as well as a report on manufacturing activity in the Chicago region.

Wednesday, January 1

China is to publish government data on manufacturing activity, a leading indicator of economic health. The Asian nation is Australia’s largest trade partner.

Markets in Australia and the U.S. will remain closed for the New Year’s holiday.   

Thursday, January 2

China is due to release the final reading of its closely watched HSBC manufacturing PMI.

In the U.S., the Institute of Supply Management is to release its manufacturing PMI, while the Labor Department is to release its weekly report on initial jobless claims. The country is also to publish data on construction spending.

Friday, January 3

The U.S. is to round up the week with official data crude oil stockpiles and natural gas inventories.