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AUD/USD Little Changed as Employment Data Looms

H.S. Borji
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AUD/USD Little Changed as Employment Data Looms

The Australian dollar was little changed against its US counterpart, as traders remained on the sidelines ahead of key Australian employment data.

The AUDUSD was trading at 0.9396, declining 0.05 percent. The pair traded within a narrow range of 0.9390-0.9416. The pair is supported at 0.9371. Initial resistance is likely found at 0.9442.

In other trading, the Aussie tumbled against the New Zealand dollar, as the AUDUSD declined 0.25 percent to 1.0667. The pair is testing initial support at 1.0673, with initial resistance likely found at 1.0719.The pair has tumbled more than 2.8 percent over the past four weeks, drifting further below the 1.10 handle.

In economic data, Australian consumer confidence increased slightly in July, Westpac and the Melbourne Institute reported today. The consumer sentiment index, which is based on a survey of 1,200 consumers, edged up 1.9 percent in July from 93.2 to 94.9.

Consumer confidence tumbled sharply the previous month in response to the Commonwealth Budget, which has been described as the “toughest” in nearly two decades.

Meanwhile, on July 1 the Reserve Bank of Australia kept interest rates unchanged for the eleventh consecutive month, signaling that borrowing costs will remain low for a prolonged period.

Westpac expects confidence levels to recovery through 2014 “as anxieties around the Budget ease,” according to Westpac chief economist Bill Evans. “In time, those trends, along with a gradually improving global economy will lay the foundation for higher rates later in 2015.”

Westpac forecasts the first rate hike to materialize in August of next year.
In Chinese data, consumer prices slowed more than forecast in June, but the impact was offset by slower deflation at the producer level.

Chinese consumer prices advanced 2.3 percent annually in June, compared to 2.5 percent the previous month, the National Bureau of Statistics of China reported today.

Producer prices, meanwhile, declined 1.1 percent annually in June, following a 1.4 percent drop the previous month.

The disappointing Chinese inflation figures did very little to upset the AUD/USD, as investors shifted their attention to Thursday’s Australian jobs report.

The Australian Bureau of Statistics is expected to announce the addition of 12,300 jobs in June, following a decline of 4,800 the previous month. The unemployment rate is expected to nudge up from 5.8 percent to 5.9 percent.
The Australian government expects unemployment rate to rise to 6.25 percent and stay at that level until 2016, as far-reaching budget cuts take hold. The government also forecasts economic growth to slow in 2014-2015 from 2.75 percent to 2.5 percent.

While household consumption is expected to remain elevated, the end of the mining boom will weigh heavily on the economy.

Currency analysts expect the Aussie to strengthen over the summer before falling back to pre-2008 levels by the end of the year, according to a recent survey conducted by the Australian Associated Press.

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