It's been a rollercoaster for the Aussie dollar as of late after the recent raft of economic data was quite positive compared to expectations. GDP was certainly the main catalyst for the positive news as it jumped to 1.1% q/q and 3.1% y/y. A very strong result in the wake of many expecting a drop off given the recent decreased in CAPEX spending from the commodity sector and service sector. This was shortly followed up with trade balance data coming in more positive at -1.58B (exp -2.05B). But at the same time retail sales data came in at 0.2% m/m, which shows that the consumer market is still somewhat depressed. For the Reserve Bank of Australia this will still be a worry given that domestic consumption has been somewhat lacklustre, and the good data may spur the RBA to still look into cutting rates. Given the recent data and the fact the RBA has preferred to hold fire it would seem that the this may be a catalyst for exactly that.
Despite the positive data and the likelihood that the RBA might be a little reluctant to cut rates further the Australian economy still looks sluggish. The general consensus is that strength in the AUD in the marketplace is being over showered however by the bullish nature of the USD. And until we see a pickup in Chinese data I would anticipate that the Australian domestic economy will continue to remain sluggish.
When looking at the AUDUSD on the charts it's quite clear that the USD is holding back further bullish momentum. Previous fundamental data such as this would have seen more aggressive buying, but this has certainly not transpired and the AUDUSD now finds itself held up on support at 0.7226. A strong non-farm payroll data reading tomorrow could quickly see the AUDUSD pushed down to further support at 0.7105 and the market is looking to position itself ahead of the reading. If we see a weaker result a jump up to resistance at 0.7306 is very plausible as the market is pricing in positive news.
Canadian dollar traders have also been left sorely disappointed as of late as the USDCAD has had a strong resurgence on the charts. Weaker than expected crude oil data today didn't help the case as US oil inventories came in at -1.37M (-2.50M exp). Markets are however expecting that the upcoming trade balance data will be positive compared to the previous reading and this is currently holding back further advances on the chart, with the USDCAD struggling to break through resistance at 1.3149. The case for further advances will be realised if there is a positive non-farm payroll reading or weaker trade balance data. Above the current resistance level the next level is looking strong at 1.3275. Support levels can also be found at 1.3023 and 1.2905 and current market expectations are low for a large drop.
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