Forex - AUD/USD weekly outlook: 10-14 October 2011

Forex News - The Australian dollar ended the week higher against its U.S. counterpart on Friday, as a potential recapitalization plan of European banks and upbeat U.S. nonfarm payrolls data boosted market sentiment.

AUD/USD hit 0.9878 on Friday, the pair's highest since September 28; the pair subsequently consolidated at 0.9766, rising 2.24% over the week.

The pair is likely to find support at 0.9386, the low of October 4 and resistance at 0.9954, the high of September 28.

Demand for riskier assets was boosted on Friday, after the U.S. Department of Labor said nonfarm payrolls rose by 103,000 in September, far more than the expected 53,000 gain, while payrolls for the previous two months were revised up by a total of 99,000.

But the Aussie's gains were limited after ratings agency Fitch downgraded its rating for Italy to A+ from AA-, and cut Spain’s rating to AA- from AA+, reigniting fears over contagion from the region’s financial crisis.

The Australian dollar tumbled to a one-year low on Tuesday after the Reserve Bank of Australia left interest rates unchanged at 4.75%, in light of the "very unsettled conditions in global financial markets."

But the Aussie quickly erased losses, after official data showed that Australian building approvals rose much more-than-expected in August, jumping 11.4%, far more than the forecast 1.1% increase.

The Aussie extended gains after the International Monetary Fund said on Wednesday it was considering buying Italian and Spanish bonds, and after outgoing European Central Bank president Jean-Claude Trichet said on Thursday that the central bank was to launch operations to extend liquidity to European lenders.

The ECB also left its interest rate unchanged at 1.5%.

In the coming week, developments in the euro zone look likely to remain in the spotlight. Meanwhile, investors will be looking towards Friday’s U.S. data on retail sales to gauge the strength of the U.S. economic recovery.

Australian data reports on business confidence and consumer sentiment will also be in focus.

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

Monday, October 10

Australia is to publish a report on job advertisements, an important indicator of demand in the labor market.

In the U.S., debt markets will remain closed for the Columbus Day holiday, while stock markets will be open as usual.

Tuesday, October 11

Australia is to publish a report on business confidence, an important indicator of economic health.

Later in the day, the U.S. is to publish data on economic optimism.

Wednesday, October 12

Australia is to release a report on consumer sentiment, an important indicator of economic strength. The country is also to produce official data on home loans, a leading indicator of demand in the housing market.

Also Wednesday, the Federal Reserve is to publish the minutes of its most recent policy-setting meeting.

Thursday, October 13

Australia is to publish government data on employment change and the unemployment rate, a leading indicator of economic strength. The country is also to publish a report on inflation expectations.

Later in the day, the U.S. is to release its weekly government report on initial jobless claims, as well as data on crude oil stockpiles, the federal budget balance and the trade balance.

Friday, October 14

The U.S. is to round up the week with official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.

The U.S. is also to publish official data on import prices and business inventories. In addition, the University of Michigan is to publish preliminary data on consumer sentiment and inflation expectations.

Also Friday, the G20 Group is to hold the first day of a two-day summit meeting.