Aussie Breaks Out, Strong Trade Data Improves Growth Prospects
The Australian dollar moved higher on Thursday moving above trend line resistance and poised to test the 2014 highs. Solid trade data released on Thursday made the neutral stance the Reserve Bank of Australia seem in line with the current data.
Australia reported December trade and retail sales. Trade was better than expected, posting a surplus of 468 million Australian dollars versus the consensus of 200 million. November was also revised to 83 million from a negative 118 million previously. To the dismay of the Aussie bears, the trade surplus was helped by a jump in iron ore exports and increased demand from China. In addition, the November trade deficit was revised to a small surplus. Retail sales increased 0.5% month over month, right at consensus. The RBA’s Statement on Monetary Policy will be released on Friday and will likely underscore dropping of the easing bias and like lift the June inflation forecast.
The AUDUSD increased for a third straight trading session moving above trend line support that is generated by connecting the highs in November to the highs in January. Support below the trend line is seen near the 10-day moving average at 0.8837. Target resistance is seen near the January highs at 0.8890.
Momentum is strong as the MACD (moving average convergence divergence) index generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal. The RSI is moving higher with price action reflecting accelerating momentum while printing at 57 which is in the middle of the neutral range.
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