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Aussie Consolidates Higher ahead of RBA Rate Statement

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Aussie Consolidates Higher ahead of RBA Rate Statement

The Australian dollar edged higher Monday, trading north of 0.94 US ahead of a rate statement from the Reserve Bank of Australia.

The AUDUSD climbed to an intraday high of 0.9439, before consolidating at 0.9427, advancing 0.05 percent. The trend index shows initial support at 0.9404 and resistance at 0.9443.

Stronger than forecast economic data has kept the Aussie supported in recent months. The AUDUSD has advanced nearly 2 percent since April 1. However, those gains could be challenged this week as the markets shift their attention to the Reserve Bank of Australia.

The RBA on Tuesday is expected to hold interest rates steady for the eleventh consecutive month, as policymakers sift through conflicting signals about the country’s growth trajectory. On June 3 the central bank kept its benchmark lending rate unchanged at 2.5 percent, as it sought a “period of stability” to encourage growth in the economy.

As economists continue to debate whether the next move will be up or down, the RBA appears committed to keeping the cash rate constant for the time being, according to the minutes of the June RBA policy meetings. Accommodative policies will be needed to help Australia recover from a slowdown in mining investment triggered in part by declining demand from China, the country’s largest export market.

Australia’s mining sector is forecast to reach $181 billion by 2017, which represents an average annual growth rate of 4.3 percent. That number is in stark contrast to the average annual growth rate of 23.3 percent over the past decade.

In economic data, TD Securities and the Melbourne Institute said Australian inflation advanced 3 percent annually in June. Month-on-month, consumer prices were unchanged.

The Housing Industry Association also reported today that new home sales in Australia declined 4.3 percent in May, following a gain of 2.9 percent the previous month. May marked the first decline in five months, a sign home sales may have peaked in the current cycle.

In the United States, pending home sales surged 6.1 percent in June, according to the National Association of Realtors.

However, the greenback was kept in line by disappointing business data courtesy of the Deutsche Borse Group. The Chicago business barometer – a gauge of business activity in the Midwestern United States – fell from 65.6 to 62.6 in June.

The AUDNZD advanced 0.3 percent to 1.0770. The pair’s next resistance test is the 100-day average of 1.0790. On the downside, initial support is likely found at 1.0711.

In economic data, New Zealand business confidence declined sharply in June, ANZ reported today. The business confidence indicator fell from 53.5 percent to 42.8 percent. This means nearly 43 percent of New Zealand firms are optimistic about business prospects.

In other trading, the AUDJPY declined 0.12 percent to 95.50. The pair faces initial support at 95.39 and resistance at 95.83.

On Sunday the Japanese government said industrial production advanced at an annualized rate of 0.8 percent, compared to the previous month’s 3.8 percent rate. Month-on-month, industrial production was up 0.5 percent.

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