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Aussie edges higher ahead of RBA minutes

H.S. Borji
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Aussie edges higher ahead of RBA minutes

The Australian dollar advanced against its US counterpart Monday, but the AUDUSD remained firmly capped below 88.00 ahead of the Reserve Bank of Australia meeting minutes.

The AUDUSD rose to an intraday high of 0.8797. The pair would subsequently consolidate at 0.8772, advancing 0.2 percent. The pair is likely supported at 0.8714. Resistance is ascending from 0.8794. A break above the initial resistance would expose the 20-day exponential moving average (0.8820).

The Aussie’s gains are expected to remain limited Monday, as investors continue to react to a stronger than forecast US consumer sentiment report. US consumer confidence surged unexpectedly in October, Reuters and the University of Michigan reported Friday. The consumer sentiment index increased to 86.4 in October, the highest level since July 2007.

Separately, the Commerce Department reported on Friday that housing activity rebounded sharply in September, as groundbreaking rose more than forecast to a seasonally adjusted annual rate of 1.017 million.

Australia had no economic data to report Monday, as the markets look ahead to the minutes of the October Reserve Bank of Australia meetings. The RBA held interest rates at a record low of 2.5 percent in October. That was the fourteenth consecutive month the central bank left interest rates unchanged.

“In Australia, most data are consistent with moderate growth in the economy,” read the official RBA rate statement from October 7. “Resources sector investment spending is starting to decline significantly, while some other areas of private demand are seeing expansion, at varying rates.”

The RBA also noted the “unusually volatile” state of the labour market.

“The Bank’s assessment remains that although some forward indicators of employment have been firming this year, the labour market has a degree of spare capacity and it will probably be some time yet before unemployment declines consistently.”

The Australian Bureau of Statistics revised its labour force numbers for July and August after initial reports showed wild fluctuations in the unemployment rate. The RBA later said the unemployment rate was unchanged in those two months.

Australian unemployment edged up to 6.1 percent from 6 percent in September after the economy shed 29,700 jobs.

The RBA minutes is not the only event that will impact the Australian dollar on Tuesday. The Chinese government will release a slew of economic data on Tuesday, including gross domestic product, industrial production and retail sales.

China’s GDP is forecast to grow at an annual rate of 7.2 percent in the third quarter, down from the 7.5 percent clip in the second quarter.

Industrial production is forecast to increase 7.5 percent annually in September, following a 6.9 percent gain the previous month.

Retail sales are forecast to rise 11.8 percent annually, following an 11.9 percent hike in August.

As Australia’s largest trade partner, China plays an active role in the performance of the local currency. If data are taken at face value, upbeat Chinese growth figures could lead to a huge rally for the Aussie. However, weak Chinese data could also support the Aussie if investors feel poor growth could compel Beijing to ease monetary policy further.

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