Daily Economic Commentary: Australia

[PipDiddy]

For the second day in a row, the Aussie failed to find direction in the currency markets. The AUDUSD closed the US session at 0.9151, just two pips higher from its Asian open price. Similarly, the AUDJPY ended the day hardly changed at 82.85.

It seems like the worse-than-expected results on the country's employment situation report won't be enough to keep the Aussie down for long. After dropping early on during the Asian session, the Aussie managed to retrace all of its losses once the European trading session went underway. Could this be the work of the Aussie's yield advantage? Remember, interest rates in Australia one of the highest among the major economies, making it a prime candidate for carry trade.

No economic data coming out of Australia again today so the Aussie's price action would most likely be driven by the news coming out of other major economies, particularly the US retail sales report later at 1:30 pm GMT!

[PipDiddy]

The Australian dollar posted its 6th straight day of gains versus the dollar, as the AUDUSD closed the week at 0.9156. However, buying momentum seems to have slowed down, as the pair has failed to make new significant highs. What could be in store for us this week?

We may see some tentative trading for the better part of this week, as not much high impact news is on deck this week from Australia. Just watch out for the minutes of the latest RBA meeting due tomorrow at 12:30 pm GMT. It will contain information regarding the RBA’s decision to hike interest rates earlier this month. Perhaps it’ll drop some clues on whether or not they will continue to hike rates in coming months as well.

Aside from that, be on the lookout for shifts in risk sentiment. Risk appetite came back last week to give higher yielding currencies a boost, but the skeptic in me thinks that this might just be the dollar bulls taking a breather. Also, keep an eye out on commodities trading – if gold continues to rise, it could provide fuel for AUD bulls to keep on going.

[PipDiddy]

The com-doll gang was single-handedly overpowered by the greenback in yesterday's trading, causing the AUDUSD to crash to a low of 0.9096. Australia didn't release any economic reports in the past 24 hours but let's find out whether today's data could provide support for the AUD.

Today, the RBA is set to release the minutes of their latest monetary policy meeting, during which they hiked their rates by another 0.25%. Bullish comments from the central bank officials could help keep the AUD afloat but traders are probably more interested to know whether the RBA would conduct more hawkish moves in the near term. The AUD might have a tough time making headway if the RBA minutes hint that the central bank could take another hiatus from its tightening policies.

At 11:30 pm GMT, the Melbourne Institute will release its leading index for January. Recall that this index of economic indicators climbed by 0.5% in December. Another uptick could boost the AUD.

Be on the lookout for the FOMC statement also due today. Hawkish comments from Fed officials could send the greenback soaring as traders expect that rate hikes could take place soon. In particular, plenty are itching to find out whether rates will still stay low for an "extended period". Stay tuned at 6:15 pm GMT to find out!

[PipDiddy]

The Aussie was able to regain all of its losses against the greenback yesterday. The AUDUSD rebounded to close at 0.9185 from 0.9147.

The RBA, in its monetary policy meeting minutes, stated that it is leaving its options open for its next board meeting on April 6. Remember that the central bank has recently raised its interest rate again by 0.25% to 4.00%. Now, it will probably wait and see the effects of their latest move before either keeping the rate steady again or hiking it.

Meanwhile, the Westpac leading index rose by 0.2% to 255.7 which is its highest level since August 2008. The increase in the index, while predicting a positive swing for the Australian economy, however, failed to give the Aussie some support.

RBA Assistant Governor Dr. Guy Debelle is set to participate shortly (2:00 am GMT) in a panel discussion at the MFAA Industry Leaders Luncheon, in Melbourne. Traders could look for some clues regarding the bank’s future policy shift in his statements since he is one of the advisers of the Reserve Bank Board that decides on the bank’s monetary policies. Any hawkish statement could give the Aussie some support.

[PipDiddy]

It appears that the third times the charm for the Aussie as it was finally able to bust through the 0.9200 handle yesterday. The AUDUSD managed to climb as high as 0.9252 before deciding to settle at 0.9236 at the end of the US trading session.

The currency traded mostly higher yesterday because of the Fed's decision to retain its stance of keeping monetary policy steady for an extended period of time. This implied that interest rates they could keep rates very low all the way into 2011, giving traders more hold on to their AUDUSD carry trade positions.

No economic news will be coming out of Australia today but it doesn't mean that volatility will also be absent! The US consumer price index, the Philadelphia manufacturing index and the weekly unemployment claims that will be released later could determine whether the falling trend line on the daily chart pointed out by Big Pippin would hold or not.

[PipDiddy]

An uneventful day from Australia left the AUDUSD within range, although the pair did close slightly lower at 0.9208. With the week coming to a close, could we see some profit taking take place today?

I took a look at the BabyPips.com Economic Calender and... I didn't see anything! What I mean is, there isn't any high impact data coming out from Australia or the US. We may see more range like movement today. Still, I caution you to keep an eye out for the usual culprits that could affect AUD trading, such as commodity trading, as well as any news from Europe regarding the Greece issue.

[PipDiddy]

The Aussie fell victim to greenback strength last Friday, with heightened risk aversion pushing the AUDUSD to the 0.9150 area. Conflicts surrounding the Greek debt saga forced most higher-yielders to return their recent gains, pulling the AUDUSD down from its fresh two-month highs.

Australia's newly released motor vehicle sales report printed a 1.9% decline for February, following January's staggering 3.5% drop. Could this be a sign of faltering consumer confidence in the Land Down Under?

Apart from their CB leading index due Thursday 11:00 pm GMT, no other economic reports are due from Australia from the rest of the week. The leading index printed a humble 0.6% climb in December and could report another uptick for January. Keep an eye out for a couple of speeches from RBA officials, namely Assistant Governor Philip Lowe and Governor Glenn Stevens who are set to speak on Wednesday and Thursday respectively. Hawkish comments concerning Australia's future monetary policy could provide support for the Aussie this week.

[PipDiddy]

The Aussie was able to rally late during yesterday’s game to pare off its losses and even edge the greenback. After hitting a low of 0.9085, the AUDUSD rebounded to close higher at 0.9183 from 0.9155.

The drop in the gold prices earlier during the day weighed heavily on the Aussie. Remember that Australia is one of the biggest producers of gold in the world, giving the Aussie an 80% correlation with the price of gold. Gold fell to $1092.10 per ounce but eventually rallied to close at $1099.50 per ounce. The Aussie rebounded along with it.

No economic reports are due in Australia today. The Aussie, however, could experience some volatility when the US’s February existing home sales are released later at 2:00 pm GMT. The account is expected to print 5.01 million sales in February on top of the 5.05 million during the month prior. A strong figure here could spark some risk taking, benefiting the higher yielding assets like the AUD.

[PipDiddy]

The AUDUSD was directionless in yesterday's trading session. Although it fell early on during the Asian trading session, the AUDUSD was able to pare its losses once the US trading session rolled along. The pair ended the day at 0.9188, just five pips higher from its open price that day.

Tomorrow, Australia's CB leading index for January will come out. The CB leading index, which is a composite index of seven economic indicators (some previously released), tries to predict the direction of the economy. A rising reading means that the economic conditions are improving while a falling reading indicates otherwise. If we see another improvement from the 0.6% seen last December, we could see some buying support for the AUDUSD.

[PipDiddy]

The Aussie wiped out yesterday, as a wave of dollar buying caused by the risk aversion tide hit the trading shores. The AUDUSD fell over a hundred pips from its opening price to close at 0.9074.

Tonight, we’ll see if the Aussie bulls will have enough to recuperate their losses from yesterday. First, at 10:15 pm GMT, RBA Governor Glenn Stevens will be delivering a speech at the ACI 2010 49th World Congress in Sydney. It’ll be interesting to see whether he expresses an attitude of confidence in the Australian economy, or if he will continue to show “cautious optimism”. If his statements are more upbeat, it may be a signal that we could see more rate hikes coming from the RBA in the near future.

Later on, at 11:00 pm GMT, the CB leading index will be released. Take note that December’s reading took a turn for the better, as the index rose by 0.6%. Seeing as how the Australian economy has been fairing pretty well so far in 2010, could we expect another rise in the index for January?