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Aussie approaches 3-week high ahead of key data

H.S. Borji
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The Australian dollar advanced further against its US counterpart Monday, approaching a three-week high on improved risk appetite.

The AUDUSD advanced 0.1 percent to 0.9347. The AUDUSD reached an intraday high of 0.9365, the pair’s strongest reading since May 19. Initial support is likely found at 0.9315 and resistance at 0.9357. The near-term bias is bullish above 0.9300 ahead of key Australian data.

The Aussie was supported by stronger than forecast Chinese trade data over the weekend. Chinese exports expanded 7 percent annually in May. The world’s second-largest economy posted a trade surplus of $35.92 billion, up from $18.45 billion in April.

Separately, Japanese gross domestic product surged in the first quarter, advancing at a quarterly clip of 1.6 percent. Year-on-year, Japanese GDP increased 6.7 percent in the first quarter.

A dearth of economic data kept the markets trading thin Monday, as investors looked ahead to a more active schedule on Tuesday. The Australian Bureau of Statistics will present data on home loans and investment lending for homes, which will provide key insights about consumer confidence and Australia’s housing market.

Home loans are forecast to rise 0.2 percent in April, following a decline of 0.9 percent the prior month.

National Australia Bank will also release its business conditions index Tuesday, which provides insights into business profitability and employment conditions in Australia.

The Melbourne Institute will release its monthly consumer confidence index later in the week.

The Australian Bureau of Statistics will release May employment data on Thursday. The unemployment rate is forecast to rise 0.1 percentage point to 5.9 percent. The Australian government expects joblessness to rise to 6.25 percent as budget cuts take effect.

In the United States, the Commerce Department on Tuesday will release data on wholesale inventories, which are used to calculate gross domestic product. Wholesale inventories are forecast to rise 0.6 percent in April, following a gain of 1.1 percent the prior month.

The National Federation of Independent Business will also release its monthly business optimism index. The report is used to gauge current trends in US small businesses.

The Aussie was also higher against the euro. The EURAUD declined 0.52 percent to 1.4549. The pair faces initial support at 1.4520 and resistance at 1.4659.

The AUDNZD advanced 0.21 percent to 1.1004, its highest level since June 5. The pair is testing initial resistance at 1.1008. Initial support is likely found at 1.0946.

The Reserve Bank of New Zealand will issue a rate decision Wednesday. The central bank is expected to raise interest rates from 3 percent to 3.25 percent. This would mark the third time the RBNZ raised its cash rate this year.

The performance of the Australian dollar depends largely on the country’s economic performance and whether the economy can successfully shift away from mining. Strong economic data earlier this year made the Aussie one of the best performing developed-nation currencies. However, Australia’s recovery could be slow, as the government seeks to cut its budget deficit in half over the next year through a combination of tax hikes and spending cuts.

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