Daily Economic Commentary: Australia

[PipDiddy]

The AUD rode a wave of optimism yesterday, clearing out its losses for the week. The AUDUSD pair closed at 0.9172. The last two Fridays, we’ve seen the pair make solid dips – will today make it three weeks in a row?

Like I said yesterday, risk sentiment got a nice boost from employment data that showed that the job market grew once again. With the labor market showing signs of improvement, this should put pressure on the RBA to keep raising rates in 2010. Word on the street is that we could see another rate hike in the first meeting next year...

While nothing is coming out from Australia today, I’m keeping an eye out for data out of China that will be available at 2:00 am GMT. The most notable data will be the industrial production y/y report, which is expected to show that production has grown by 18.2% from levels a year ago. Take note that China is one of Australia’s major trading partners. If the Chinese are doing well, it could be bullish for the AUD.

[PipDiddy]

After a brief period of consolidation, the Aussie edged lower against the greenback as US retail sales came in much better than expected. Strong economic data from China, Australia's largest trading partner, provided a bit of support for the Aussie.

This week, Australia has a couple of top-tier reports scheduled. The action kicks off on Tuesday when the RBA releases the minutes from their latest monetary policy meeting. This report, which is due 12:30 am GMT, should provide in-depth information behind their most recent interest rate decision. Aside from that, RBA Governor Glenn Stevens is expected to downplay the hype for another rate hike come February.

On Wednesday, traders turn their attention to Australia's third quarter GDP. Their economy probably expanded by 0.4% during the quarter, bringing the annualized growth rate to 0.7%. Continued strength of the Australian economy could keep driving the Aussie higher.

No other economic reports are due for the rest of the week but these two high-impact reports that I discussed could dictate the direction of the AUDUSD for the entire week.

[PipDiddy]

Price action for the AUDUSD was a little flat as well yesterday. The pair, though, managed to sport some gains. The AUDUSD closed at 0.9168 from 0.9110.

Higher yielding assets like the AUD fared better yesterday over the relatively safer USD and JPY because of the news that Dubai World, which earlier stated its intention to freeze its debt payments, got some credit worth $10 billion from Abu Dhabi.

Earlier today, data on Australia’s housing starts during the third quarter was released. The number of new residential buildings that began construction during the period surged by 9.4%, better than the 6.4% estimate. The Aussie, however, still lost some support following the release. Traders could have sold on news given the building permits data which is released on a monthly basis.

On a separate note, the RBA just published the minutes of its recent monetary meeting. In the report, the RBA said that it will have to increase the interest rate further as the Australian economy improves. Remember that the RBA already made a hike for the past three periods. The central bank’s interest rate currently stands at 3.75%. With a robust domestic consumption, led by the country’s housing sector, plus a growing export demand from China and India, the RBA sees a very sustainable growth for the country.

A possible rate hike on February would of course be bullish on the AUD unless it is sold on news.

[PipDiddy]

The Aussie took a major hit yesterday, falling more than a hundred pips from its Asian open price. After hitting a high of 0.9174, the Aussie remained well-sold throughout the day, closing the US session at 0.9059.

Australia’s GDP report just released seems to agree with the Aussie bears. The GDP report showed that Australia’s economy grew only 0.2% during the third quarter, half the 0.4% gain initially expected. The lower-than-expected figure is putting even more selling pressures on the Aussie. If this kind of selling momentum keeps up, the Aussie could burst through support at the 0.8950-0.9000 region.

No high-profile economic reports from Australia today so the Aussie’s price action would be largely dependent on the FOMC interest rate decision later in the day. Forex Gump did a short article on the event, so head on over to his blog if you want more information.

[PipDiddy]

The Aussie hit the canvas once again and barely made the 8 count in yesterdays trading round. Most of the movement came early in the day, when the GDP report came out worse than expected, causing traders to sell the AUD. Ultimately, the AUDUSD pair closed at 0.9007.

It seems that with traders are taking the FOMC positively, which in the past could have been bullish for higher yielding currencies like the AUD. However, the last few weeks have taken a sudden shift as we end the year – good US data has led to bullish USD movement. Is this a case of fundamentals driving the market now? Or merely traders unwinding their short USD trades that were made during the past 9 months?

Nothing on deck for Australia for the rest of the week, so we could see more range bound movement. Look out for the unemployment claims and Philly Fed manufacturing index from the US. If these come out better than expected, it may boost the USD, leaving higher yielding currencies like the AUD out to dry.

[PipDiddy]

Down, down, down... That's pretty much where the Aussie's been headed for the past 24 hours. Heck, it's been tumbling down for almost an entire week already! With the lack of high-impact Australian economic reports, the Aussie gave way to US dollar strength in a jiffy.

The AUDUSD has been breaking one support level after another as it took a sharp dive from the 0.9200 area at the beginning of the week and reached an intraday low of 0.8870 yesterday. My buddy, Forex Gump, has an interesting take on the probable demise of the Aussie and you can read about that here.

No economic reports are on deck for Australia until the end of the week. This could mean that the US dollar would continue to trample on the Aussie as the week draws to a close. Ouch!

[PipDiddy]

Whew! The Aussie was able to recover some of its Thursday losses against the dollar to conclude last week’s trading. The AUDUSD fell to a low of 0.8811 before closing higher at 0.8907.

Australia’s economic calendar was report-free last Friday. Though, better-than –expected earnings results from US firms like Nike, Accenture, Oracle, and Research in Motion helped keep buying interests in the US capitals markets which incidentally benefited the likes of the AUD as well. Still, the US equities markets together with the Aussie were down for the week.

No economic reports are due in Australia this week. The Aussie could stay range-bound until after the Christmas holiday given the lack of economic flows.

[PipDiddy]

The Aussie began the week on a sour note as it fell almost 100 pips from its Asian open price. It looks like the 0.8600 handle isn’t too far away for the Aussie, especially since the dollar has been showing a lot of strength in the past couple weeks.

Just released was Australia’s CB leading index for October. The report, which is designed to predict whether the economy is improving or not, printed a reading of -0.3%, lower than September’s revised down reading of 0.0%.... Heh, it seems like nothing’s going right with the Aussie.

As I said in my update yesterday, no highly important economic data coming out of Australia this week so we could see the Aussie stay range-bound ahead the holidays.

[PipDiddy]

Another down day for the Aussie, as it succumbed to USD buying pressure in yesterday's trading sessions. The AUDUSD pair closed at 0.8762 and is now approaching potential resistance turned support. The question is, will it hold?

The AUD has been hit by falling gold prices, which is now trading at around $1,086 an ounce. With no economic reports coming out to help support the AUD, we could see more of the same slow but steady dollar buying that's been happening the past couple of days. Watch out for news from the US, more specifically the new home sales report, which could buoy USD sentiment once again.

[PipDiddy]

Staging a comeback during the Christmas holidays, the Aussie capped its losses against the greenback and rallied towards the 0.8850 area last week. No economic reports were released from Australia then but the rebound in commodity prices may have provided a boost for the Aussie.

This week, Australia's economic calendar is pretty much barren, with the exception of the private sector credit data due on Thursday. The report could show that the total value of new credit issued to consumers and businesses rose by 0.1% in November. Watch out for the actual figure due 12:30 am GMT.

Other than that, the coast is clear for the Aussie. With greenback strength seen to dominate for the rest of 2009, the Aussie could sink down under with no economic reports to boost its appeal. Then again, we could be in for a few more surprises just before the New Year kicks off so stay on your toes!