The Australian Dollar Is Back Above 77 Cents - Now For CapEx Data
Axi | Feb 23, 2017 10:39
Originally published by AxiTrader h2 Key Takeaway/h2
The Australian dollar broke higher in Asia yesterday trading up to a high above 77 cents before what has become usual selling chased it back into the 0.7670/80 region.
That's where it was sitting before the release of the FOMC minutes at 6am this morning Sydney time. And that's where it swiftly bounced from back above 77 cents as traders now wait on the release of today's all important private new capital expenditure data for Q4 2016.
Again though the big question for traders and investors - and one I think only the US dollar can answer - is whether or not the Aussie can hold above 77 cents and push higher. Or has ben the case more than a dozen times in the last 12 months the AUDUSD will again fail at this level
h2 What You Need To Know/h2The Australian dollar popped up and through a little 1 and 4-hour downtrend yesterday afternoon to run to an overnight high of 0.7709 before the pre-FOMC pull back.
At 77 cents, or thereabouts again today the Aussie is benefitting from a mildly weaker US dollar in Asia and the confluence of positives which have always historically been associated with a higher AUD/USD.
Commodity prices, investor risk appetite, an RBA in no hurry to ease rates, global growth picking up, the risk goes on.
But, as has become usual, the Bulls are rightly nervous about taking prices much through the graveyard above 77 cents. That said though the positives accruing and the shallow nature of any dips shows investors and traders are firmly in buy-the-dip mode at the moment.
With the US dollar again finding itself unable to push higher All it needs is for the US dollar to dip sustainably and it 78 cents and beyond for the Aussie.
AUDUSD v USD Index (inverted)
The fact that the Aussie has been able to outpoint the US dollar so far in 2017 is testament to the strength of the other positives surrounding global and Australian growth, the outlook for the RBA, and investor risk appetite.
But the price action - stalling above 77 cents consistently - suggests that even with this strong level of support the Aussie has garnered lately there needs to be an additional positive piece of news for the AUD/USD to climb further.
That could be a weaker US dollar. Or it could be confirmation that the RBA's recent upbeat chatter about the economy is on the money. That makes today's release of the December quarter private new capital expenditure data a vital piece of the puzzle that is Australia's current growth trajectory.
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The market is expecting a further fall in CapEx during the December quarter with the average forecast for a 1% fall following on from the September quarters 4% drop. That's a slowdown in the rate of falls and gives credence to the RBA governor's comments that we are 90% through the drag on the economy that the end of the mining investment boom has caused.
Which means traders won't just be factoring in last quarter's numbers to get a hint at Q4 GDP but they will also actively be looking at the forecasts for CapEx also contained in today's release.
Will we see a further uptick in this next instalment from the 4th instalment's intention to invest $106.9 billion? That will be important.
We'll know at 11.30 am AEDT.
Looking at the technicals the key short term parameters are last week's high at 0.7733, with a little resistance another 10-15 points above that, while support is at at 0.7640/50.
Have a great day's trading.
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