Australian Dollar Higher As Traders Await An Upbeat RBA
Axi | Jun 06, 2017 11:45
Originally published by AxiTrader
The Australian dollar is higher again this morning sitting at 0.7484 as a confluence of better than forecast data and a break of technical resistance in the 0.7450/60 region has opened the topside.
That the data both here in Australia, and of course China's services PMI, yesterday was better than expected and appears to materially diminish the chance of a negative print for Q1 GDP when it is released tomorrow is important given the recent - and growing - discussions about the potential for Australia to have a recession.
While I am firm in the view that Australian households face headwinds - or at least are facing into these winds - and this will impact consumption going forward it is worth noting that the data hasn't been terrible lately.
Indeed while the US, G10, UK, and even EU to a certain extent, reads of the Citibank Economic Surprise index have fallen in the past month Australia's data has continued to print better than expected.
That the data has been beating important doesn't negate the concerns myself and other have. The worries over Q1 2017 GDP and it's possible negative print came out of nowhere with the release of construction work done and the apparent acceleration in the slowdown for residential construction.
Yesterday's release of company profits and inventory data, not to mention today's current account and government spending data make that less likely. But it does highlight that the risks - as Westpac's Bill Evans has said recently - are later this year and into 2018.
So traders can focus on the RBA's message that Australian growth will remain robust this year. But it does not change the outlook I've been talking about recently which is that the risks are later this year and into 2018.
Which makes the RBA governor's statement after today's board meeting extremely important.
I can’t wait to see what governor Lowe has to say at 2.30pm today. My guess is that he will continue to retain a robust and bullish outlook for Australia's economic future. After all, it was only a month ago that the RBA said in its quarterly Statement on Monetary Policy that it expects Australian growth to accelerate toward potential – 2.75%+ - this year and next.
Any change would be a surprise to me and signal a big step back from that outlook. So we'll all be parsing the governor's words closely.
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Price action wise, the 0.7515/20 region I highlighted yesterday as the target after the 0.7450/60 level remains in the frame. If that level breaks the Aussie can, could, go on a strong gallop toward 76 cents.
That doesn't mean the many deficiencies I wrote about last week are suddenly gone, nor that the clouded consumer outlook has evaporated. It's just that prices to the downside have held and a break higher will gain momentum if resistance breaks. Especially if the 200 day moving average at 0.7527 gives way.
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