Wed, Jan 27, 2021 @ 14:20 GMT
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Aussie Dips on Soft Construction Data

The Australian dollar has dipped lower in the Wednesday session. Currently, AUD/USD is trading at 0.7359, down 0.15% on the day.

Aussie rally fizzles as construction work declines

The Australian dollar has taken a pause on Wednesday, after a huge gain of 1.0% a day earlier. The culprit was a soft reading from Construction Work Done, a key gauge of the construction industry. The indicator fell by 2.6% in the third quarter, which was a sharper contraction than the forecast of -2.0%. This marked a ninth straight quarter with a decline, as the construction sector has been marked by a prolonged contraction. The industry has been in decline since mid-2018, and the Covid pandemic, which has resulted in numerous lockdowns, has only aggravated an already difficult situation. Still, even with the weak release, AUD/USD has sustained minimal losses on Wednesday.

The weak construction data ended a strong upswing for the Australian dollar, which touched a 10-week high earlier on Wednesday. The currency climbed 1.1% on Tuesday, as investor risk sentiment jumped on the news that Janet Yellen has been tapped to become US Treasury Secretary in the Biden administration. Yellen will bring with her a wealth of experience which she accumulated as head of the Federal Reserve under President Obama. As well, investors were pleased with the news that the long-awaited transition from the White House to the Biden team is underway.

Market focus will now shift to Australia Private Capital Expenditure, a key gauge of activity in the private sector. This indicator has also been marked by contraction, with six consecutive declines. The reading for Q2 came in at -5.9%, its largest decline since 2015. The pace of decline is projected to ease in the third quarter, with an estimate of -1.5 per cent.

AUD/USD Technical

  • AUD/USD faces resistance at 0.7390. Close by, there is resistance at 0.7421
  • There is support at 0.7306. Below, we find support at 0.7252
  • AUD/USD easily broke above the 10-day MA line on Tuesday, a sign of an upward trend
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