Daily Economic Commentary: Australia

[PipDiddy]

The Aussie surfed up the charts yesterday as the RBA's interest rate decision sparked a wave of bullishness in the market. AUD/USD rallied to an intraday high of 1.0298 after dipping to a low of 1.0229. It then ended the day at 1.0280, 23 pips above its opening price.

As expected, RBA Governor Glenn Stevens made no changes to the bank's monetary policy and kept rates steady at 3.50%. He didn't seem that optimistic in his outlook for the global economy, but sounded confident about the situation on the domestic front.

Of course, it also helped the Aussie that the building approvals report came in better than expected as it only affirmed the bank's decision not to cut rates. The number of new building approvals issued in May grew more than five times the consensus at 27.3%.

And it looks like the good vibes for the Aussie didn't end there!

Earlier, it was reported that retail sales grew by 0.5% in May after contracting by 0.2% in April. The figure also tops forecasts for a 0.3% uptick. Also, the AIG services index suggests that the country's service sector could be on its way to expansion. The figure for June came in at 48.8 following May's 43.5 reading.

Now the question is, will the positive vibes from these reports be enough to snag the Aussie another win today?

[PipDiddy]

Steady as she goes! AUD/USD stayed mostly on course the entire day as it simply traded within a relatively tight 60-pip range. By the end of the U.S. trading session, the pair was sitting at 1.0278, just 3 pips lower than its opening price that day.

Earlier today, however, Australia’s trade balance was released. It came in much better than expected as it only showed a 290 million AUD deficit. The forecast was for a 510 billion AUD deficit.

No red flags on Australia’s forex calendar left for today, so don’t expect the Aussie to exhibit a lot of movement. Watch the previous day highs and lows folks, as they could serve as important inflection points!

[PipDiddy]

Thanks to a rate cut by the PBoC, the Aussie held its own in yesterday’s wild action in the forex markets. AUD/USD stayed afloat and managed to edge 12 pips higher to finish at 1.0289. After four straight days of consolidation, is AUD/USD prime for a breakout?

For the second time in less than a month, the People’s Bank of China cut base line rates, which is both a good and a bad sign for commodity-based economies like that of Australia.

On one hand, it means that the PBoC recognizes that the Chinese economy is starting to slump. On the other hand, it also indicates that the central bank is gonna do whatever it can to prop up the Chinese economy, which should bode well for Australia. Remember, China is one of Australia's largest trading partners, so whatever direction the Chinese economy is headed, the Australian economy normally follows suit.

Nothing lined up today, but seeing as how we’ve seen some tight consolidation the past four days, I can’t help but feel we’re headed for a break out today. Keep in mind that the U.S. non-farm payrolls report is due tonight at 12:30 pm GMT, and this could prove to be a major mover in the markets!

[PipDiddy]

Last Friday, market sentiment soured due to the skepticism surrounding the euro zone situation and a very disappointing U.S. non-farm payrolls. AUD/USD closed the day at 1.0220, 69 pips lower from its opening price.

Euro zone’s permanent bailout fund, which is more commonly known as the European Stability Mechanism (ESM), is unlikely to begin as scheduled. Meanwhile, the U.S. non-farm payrolls failed to meet forecast and showed that only 80,000 people were added to the workforce. The market was expecting at least 97,000 people.

No major economic data released for the first part of the week but on Thursday, Australia’s jobs report will be published. The report is anticipated to show that the companies hired 3,000 (net) more people in June and that the unemployment rate rose to 5.2% from 5.1%. If the jobs report comes in better than expected like the last three versions, we could see the Aussie stage another bullish rally.

[PipDiddy]

Phew! The Aussie bears hit the pause button yesterday as AUD/USD recovered from an intraday low of 1.0154 to 1.0203. Here’s why Australia’s data yesterday had nothing to do with the Aussie’s price action.

Okay, maybe the better-than-expected ANZ job ads spurred the Aussie bulls a bit, but I have to say that China’s inflation data might have influenced the comdolls’ price action more.

China’s consumer prices fell to a 29-month low, clocking in at an annualized rate of 2.2% in June. The cooler-than-expected inflation hinted at more room for the PBoC to stimulate the economy, which is often good news for commodity-producing countries like Australia.

The slightly weaker-than-expected NAB business confidence was already released today, so stay at the edge of your seats for China’s trade balance data also due today. Major Chinese data have the tendency to dominate comdoll price action, so make sure you have your trading plans ready!

[PipDiddy]

The Aussie choked like Chael Sonnen in yesterday's trading. It rallied against the dollar ahead of the London session and tapped an intraday high of 1.0246. However, the comdoll's rally soon lost steam and AUD/USD dropped to close the day 15 pips below its opening price at 1.0187.

Aside from the market's slightly risk averse environment, the NAB Business Confidence report for June didn't bode well for the Aussie. The index printed lower at -3 than its previous reading of -2 and the statement indicated that the RBA's most recent interest rate cut did very little to boost confidence. That's bad news for Aussie bulls as the report could give the central bank one more reason to ease monetary policy even further.

But it might still be too early to jump to such conclusions. If you're just looking to trade the Aussie for today, it would do you well to know about the reports that were released from the Land Down Under earlier.

The Westpac Consumer Sentiment report showed that financial confidence rose by 3.7% in July after being only at 0.3% in June. However, home loans for May contracted by 1.2%, erasing its 0.5% growth for April and disappointing the market's 0.8% forecast.

Also, be sure you keep tabs on market sentiment, ayt? Keep in mind that the comdoll usually does well when risk appetite is up and it doesn't mix well with risk aversion.

[PipDiddy]

Who’s the king of pips? The Aussie is! Thanks to good economic data, AUD/USD jumped to an intraday high of 1.0282 before it leveled off to close 58 pips above its open price. What is this piece of good data and why did it boost the Aussie so much?

Yesterday the consumer confidence report clocked in a 3.7% growth for July. It’s not only higher than June’s 0.3% uptick, but it also marks the five-month high for the data. Booyeah!

Apparently, consumers are more optimistic on the economy after the RBA cut its rates to address Australia’s weakening housing industry. Add that to the strong building approvals, retail sales, and trade data that we saw last week and you got yourself an Aussie bull party!

But wait! Data released a couple of minutes ago reveals that employment isn’t one of the bright spots in the Land Down Under. Not only did the unemployment rate climb to 5.2% in June, but 27,000 workers actually lost their jobs! This is a disappointment for investors who weren’t expecting changes in both reports.

No other data is scheduled for release in Australia today, so you might want to keep an eye out for intraday trend continuations and reversals that might be inspired by the major employment report.

Avoid revenge trading, kids!

[PipDiddy]

The Australian dollar got wiped out during yesterday's wave of risk aversion, pushing AUD/USD to an intraday low of 1.0100 and dragging AUD/JPY closer to the 80.00 handle. Which reports caused the Aussie to go down under?

Weaker than expected jobs data from the Land Down Under triggered a massive AUD selloff yesterday as the employment change figure showed a 27K drop in hiring. Although their jobless rate came in as expected at 5.2%, the actual employment change reading was much worse than the estimated 0.2K increase in hiring.

This bleak jobs report led most traders to believe that another rate cut from the RBA might be in the cards as the central bank's recent easing efforts don't seem to be enough to prop up the Australian economy.

It didn't help that traders were also pricing in downbeat expectations for today's Chinese GDP release. After all, the Asian giant has been chalking up weaker than expected data recently, which means that their economic growth for the quarter could fall short of expectations as well. After growing by 8.1% during the first quarter of 2012, China is expecting only a 7.7% expansion for Q2. Make sure you keep an eye out for this release because it could dictate risk sentiment for the rest of the trading sessions. Good luck!

[PipDiddy]

When there’s a will, there’s always a way. Thanks to the overall dollar weakness, the Aussie was able to reverse its losses from the day before on Friday. The Aussie closed the day at 1.0223, 83 pips higher from its opening price that day.

The dollar’s weakness was the result of China’s “not-so-weak” GDP report. While it did fail to meet expectations, it wasn’t as bad as everyone thought. It came in at 7.6% versus the 7.7% forecast.

No major news report was released on Friday from Australia and the country’s economic cupboard this week is also bare. This doesn’t mean that the Aussie won’t show any movement though. There are a lot of red flags on the U.S. economic calendar which could indirectly affect the Aussie. You can check out my U.S. daily economic roundup for that!

[PipDiddy]

Now that the weekend gap got filled, AUD/USD resumed its rally and ended the day in the green as it closed at 1.0251. AUD/JPY, on the other hand, didn't have such a good day as it chalked up a loss and closed at 80.83.

Australia didn't release any economic reports yesterday, which means that AUD/USD's gains were mostly a result of dollar weakness. After all, the U.S. printed worse than expected retail sales data, which had traders buzzing about the odds of QE3 again.

Today, the RBA is set to release the minutes of its latest monetary policy meeting and this report could shed some light on why the Australian central bank decided to keep rates on hold. It could also contain some clues on when the next rate cut could take place so make sure you read up on the minutes due 1:30 am GMT.

Don't forget that Fed head Ben Bernanke is set to give a speech at 2:00 pm GMT today! Not only could this spark additional volatility across dollar pairs, it could also result in another dollar selloff if he starts talking about the need for further easing. Be careful out there!