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Aussie Backtracks after Week-Long Offensive

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Aussie Backtracks after Week-Long Offensive

The Australian dollar backtracked Friday after a progressive week saw the AUDUSD rise more than 0.8 percent.

The AUDUSD declined 0.14 percent to 0.9356 after reaching a daily high of 0.9378. Technical support is likely found at 0.9346, 0.0323 and 0.9299. On the upside, technical resistance is at 0.9245, 0.9449 and 0.9472.

The AUDUSD pair has advanced more than 3.7 percent over the past three months and 4.4 percent year-to-date. According to the RBA, this appreciation is due in part to stronger than forecast economic data.

In US data, wholesale inventories increased 1.1 percent in March, following a gain of 0.7 percent the prior month, the Commerce Department reported today. The gain likely won’t impact the Commerce Department’s revised estimate of GDP growth as it was close to the initial estimate. The revised estimate is due for release May 29.

The AUDNZD advanced 0.28 percent to 1.0867. The pair has gained more than 1.4 percent over a three-day span, as the bulls continue to eye the 1.09 level. Initial daily support is located at 1.0789. Technical resistance is likely found at 1.0918.

The Reserve Bank of Australia announced today it plans to keep interest rates low for some time as the economy continues to recover from the downturn in mining investment. The RBA lowered its inflation outlook for June from 3 percent to 2.75 percent after consumer price inflation softened in the first quarter.

The central bank increased its growth forecast for June from 2.75 percent to 3 percent, citing a rise in consumer spending and the prolonged boom in the housing sector.

“In Australia, overall economic activity picked up over the past six months with the economy looking like it grew at close to its long-run average pace over this period,” read the RBA’s official Statement on Monetary Policy. “Much of this improvement was accounted for by a surge in resource exports…”

The RBA also said growth in Australia’s major trading partners has moderated, with the recent slowdown in China appearing to be only temporary. China is Australia’s largest trade partner, accounting for nearly one-third of total exports.

Employment growth, having been subdued over 2013, has picked up in the early part of the year, the RBA noted. In February Australia posted the biggest surge in full-time employment in more than 22 years, as employers added 80,000 full-time payrolls. Net change in employment was 18,1000 in March, official data showed. The unemployment rate fell from 6.1 percent to 5.8 percent.

Despite the recent upturn, the RBA cautions “there remains a fair degree of spare capacity in the labour market,” which has resulted in the slowest pace of wage growth in a decade.

The RBA concluded the outlook on the economy is “uncertain,” supporting the view monetary policy will remain accommodative for some time.

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