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Aussie Up On Positive Trade Data

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The Reserve Bank of Australia (RBA) will be monitoring this morning’s rise in the Aussie Dollar very closely. According to the Central Bank’s Governor, Glenn Stevens, a key tenet of the RBA’s strategy for the Austrian economy depends on a weakening of the currency.

The RBA earlier in the week shied away from raising it’s official cash rate from 2.5% in light of the rising unemployment situation. The accompanying statement from the Central Bank highlighted the neutral stance being adopted with regards to interest rates, it also stressed that it envisioned trade related growth stemming from the depreciation of the Australian Dollar.

Australia has enjoyed some solid data releases this week. GDP came in slightly ahead of expectations, as did the building approvals figure. The real boost to the currency however came with this morning’s trade figures. The important Trade Balance number for January was an impressive 1,433M against a consensus expectation of just 270M. Closer inspection shows that while export growth remained static imports rose at a reduced pace.

On publication of the trade numbers AUDUSD made a sharp break higher through the key resistance level of .9000. This is somewhat of a ‘double edged sword’ situation for the Australian economy. It is evident that the improving trade figures are correlated to the depreciating currency. The Aussie Dollar, which remains expensive by historical standards, has fallen significantly from its peak just above 1.11.

It is highly unlikely that the Australian Dollar is on it’s way back to these 2011 levels. Two elements will conspire to cap the Aussie’s rise. Firstly, the RBA will potentially take action to prevent an unwelcome appreciation. Secondly, the detrimental impact that a significant rise would have on the economy should provide enough of a deterrent to make speculators think twice. In the short term AUDUSD has some strong resistance at .9058 and currently there is no sign of sufficient momentum to take this out.

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