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Is 74 Line Next For The Aussie?

The Australian dollar is calm in Monday trade. Currently, AUD/USD is trading at 0.7386, down 0.02% on the day.

Aussie posts excellent November

The Australian dollar gained 1.1% last week and has posted an outstanding November, with gains of 4.8%. The US dollar has been in a prolonged slump, and cyclical commodity currencies like the Australian dollar have taken full advantage and made strong gains against the greenback. The Aussie shrugged off soft Australian numbers last week, as Construction Work Done and Private Capital Expenditure declined in the second quarter, and both missed their estimates. With the US dollar index close to its yearly low, the upswing in AUD/USD is clearly a case of weakness in the US dollar rather than strength in the Australian currency.

It is a busy week for Australian fundamentals. There was encouraging news on the inflation front, as the Melbourne Institute Inflation Gauge climbed 0.3% in November, marking a 4-month high. As well, Company Operating Profits for Q3 posted a third straight gain with a reading of 3.2%, although this fell short of the estimate of 4.0%.

Investors will be carefully monitoring the RBA rate decision (Tuesday, 3:30 GMT). The RBA is expected to remain on the sidelines in the final policy meeting of the year. No change is expected in interest rate levels, after the RBA trimmed rates from 0.25% to 0.10%, a record low, at the November meeting. At that meeting, the RBA implemented QE for the first time ever, announcing purchases of A$100 billion in government bonds over the next months. Although some recent economic indicators have been pointing downwards, Employment Change was unexpectedly high. The economy created 178.5 thousand jobs in October, crushing the estimate of -26.7 thousand. Job creation has looked sharp, with readings above 100-thousand in three of the past four releases. This provides the RBA with some breathing room from having to implement further easing measures to booster the economy. If the rate statement has a positive tone, the Aussie could pad its recent gains against the US dollar.

AUD/USD Technical

  • AUD/USD faces resistance at 0.7485. Above, there is resistance at 0.7569
  • We find support at 0.7301, followed by support at 0.7216
  • AUD/USD remains slightly above the 10-day MA line
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