Forex - AUD/USD weekly outlook: August 8 - 12

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Forexpros - Last week saw the Australian dollar tumble to a four-month low against its U.S. counterpart, after the Reserve Bank of Australia kept the benchmark interest rate unchanged and lowered its forecast for 2011 economic growth.

AUD/USD hit 1.0374 on Friday, the lowest since April 6; the pair subsequently consolidated at 1.0440 by close of trade on Friday, plunging 5.3% over the week, the biggest weekly drop since May 2010.

The pair was likely to find short-term support at 1.0374, Friday's low and resistance at 1.0778, Thursday's high.

In its quarterly monetary policy statement published Friday, the RBA cut its growth forecast for the Australian economy, saying it now expected growth to average 2% for the rest of year, compared to the bank's May projection of 3.25%.

Consumer prices were expected to rise 3.5% in the year through to the final quarter of 2011, up from a previous estimate of 3.25%.

On Tuesday, the RBA held the overnight cash rate target at 4.75% for a record eighth straight meeting, saying "the board remains concerned about the medium-term outlook for inflation."

"On balance, the board judged that it was prudent to maintain the current setting of monetary policy, particularly in view of the acute sense of uncertainty in global financial markets," the bank said.

Meanwhile, the U.S. Department of Labor said on Friday that nonfarm payrolls rose by 117,000 in July, above expectations for an increase of 95,000, while the previous month's figure was revised up to a gain of 46,000 from a previously reported 18,000.

The unemployment rate dipped unexpectedly to 9.1% from 9.2%, the first decline in four months.

However, the better-than-expected data failed to ease fears that the U.S. economic recovery was stalling, after a flurry of weak data earlier in the week fuelled concerns over a possible double-dip recession.

After markets closed Friday, ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA, and kept the rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.

S&P said the debt ceiling deal reached by lawmakers to cut the federal deficit by an estimated USD2.1 trillion over a decade did not go far enough and "America's governance and policymaking is becoming less stable, less effective, and less predictable than what we previously believed."

In the week ahead, markets will get their first chance to react to the historic U.S. debt downgrade. Traders will also be paying close attention to Tuesday's Federal Reserve rate announcement and its statement on monetary policy for any hints regarding further easing.

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

Monday, August 8

Australia is to publish a report on the change in the number of jobs advertized in the previous month.

Tuesday, August 9

Australia is to publish government data on home loans, a leading indicator of demand in the housing market, as well as a report on business confidence.

Meanwhile, the U.S. is to publish preliminary data on nonfarm productivity and labor costs, which are closely linked to consumer inflation.

In addition, the Federal Reserve is to announce the federal funds rate. The announcement will be followed by the bank's rate statement, which gives important insights into the economic conditions that influenced the rate decision.

Wednesday, August 10

Australia is to publish an index of consumer sentiment, a leading indicator of consumer spending.

Later in the day, the U.S. is to produce data on the federal budget balance as well as reports on crude oil stockpiles and wholesale inventories.

Thursday, August 11

Australia is to publish government data on employment change and the unemployment rate, leading indicators of economic health, as well as a report on inflation expectations.

Meanwhile, the U.S. to publish official data on its trade balance, as well as a government report on initial jobless claims and natural gas stockpiles.

Friday, August 12

The U.S. is to round up the week with government data on retail sales, the primary gauge of consumer spending, while the University of Michigan is to produce preliminary data on consumer sentiment and inflation expectations.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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