The AUD/USD was among the major advancers of last week as economic news for the Australian economy. Surprised on the upside and as sentiment among investors improved and they rushed to buy higher-yielding currencies, shedding their holdings in safe havens. In the beginning of the week the data for the housing market in Australia came in better-than-expected. The new home sales rose by 2.8%, while, the building approvals declined by 2.5%. Analysts were expecting the number of new building approvals issued to drop sharply by 14.6%. The home price index registered its first positive reading since January, indicating that the Australian housing market is finally taking a breath of fresh air. On Thursday, the much anticipated retail sales and trade balance figures were announced. The retail sales rose by 1.0%, much more than the 0.6% increase economists were projecting. The trade balance, on the other hand, moved from deficit to surplus for the first time since February. The positive reading, however small, indicated that Australia is once again growing by employing the demand in the world market. The Aussie rose in a response to all these positive economic data, but its advance was not that smooth. On Wednesday and on Thursday, when the monetary policy statements and rate decisions from the U.S. and Europe were announced, the AUD/USD dropped sharply, touching lows of 1.0431. The decline was due largely to the disappointment among market participants, who were expecting to see more monetary stimulus coming from both sides of the Atlantic. Instead, the Federal Reserve chose not to extend its bond-buying program, while the ECB did not take immediate measures to fight the debt crisis in the region. The European Central Bank’s president, however, vowed to preserve the integrity of the Eurozone at all costs and also said that he is standing ready to intervene in the markets if the borrowing costs of Spain and Italy continue to grow. Despite the initial negative response to these news, investors eventually moved to higher-yielding currencies when they had some time to assimilate the new information. The rally in the AUD/USD was particularly strong on Friday, when the currency pair closed at 1.0563 after touching highs of 1.0573 for the session. This week the Aussie is moving higher again as market participants demand for risky assets is rising. The high-yielding currency was also helped by the better-than-expected job advertisements numbers, which were released yesterday and by the decision of the Reserve Bank of Australia to retain its cash rate at its current level of 3.50%. The Aussie touched fresh new highs of 1.0605 for the period since late March, but it is currently trading off of them at 1.0567.
Technically speaking, the support in the AUD/USD is provided by the 25-period moving average, which is currently standing at 1.0533, while resistance stands at the highs of 1.0605 we touched yesterday. Oscillators are mixed with the relative strength index in mid-range, standing at 57, while the stochastic is close to the upper band of its respective range, standing at 75. The MACD is moving above 0, but it is off of the highs it touched in late July.
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.