The Aussie slides on weak economic data
The greenback has gained traction on Tuesday especially against the Australian dollar as yields in the US continue to move higher ahead of the FOMC’s interest rate meeting, scheduled to end on Wednesday afternoon. The Australian economy continues to weaken, which is generating dovish statements from the RBA.
The Australian dollar was the biggest mover of the major currency pairs, dropping about 1.5% against the greenback in response to declining building approvals and dovish comments by the central bank governor. Building approvals came in at -6.9% vs. a consensus forecast of +2.3%. Not only were the June building approvals weaker than expected, but the May decline was revised to -4.3% from -1.1%.
Additionally, Reserve Bank of Australian Governor Stevens reiterated that there was scope to cut rates after last week’s Consumer Price Index data, and opined that the decline in the Australian dollar did not threaten the inflation outlook.
There is a deluge of data that could change the trajectory of the US dollars path over the next few trading sessions. The FOMC meeting on Wednesday will be followed by GDP on Thursday, along with the ISM, manufacturing report and Friday’s non-farm payroll report.
The AUDUSD currency pair is testing support levels near 0.9000, which coincides with a horizontal trend line. A close below this level would likely lead to a test of weekly support near 0.8850. Resistance is seen near the 10-day moving average at 0.9205.
Momentum is turning with the MACD (moving average convergence divergence) index poised to make a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crossed below the 9-day moving average of the spread. The index is about to move from positive to negative territory confirming the sell signal.
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