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Aussie Builds Momentum

H.S. Borji
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Aussie Builds Momentum

The Australian dollar advanced against its US counterpart Monday, as the AUDUSD pair pushed above the 0.94 handle amid disappointing US home sales figures.

The AUDUSD advanced 0.13 percent to 0.9407, easing off an intraday high of 0.9414. The pair rebounded after declining in each of the last two sessions, as the US dollar continued to benefit from safe-haven demand. The pair faces initial support at 0.9382 and resistance at 0.9417.

The Aussie is trading well above its long-run average, as investors weigh global developments against a steady streak of economic releases from the United States.

Australia has a low volume schedule this week. On Tuesday the Housing Industry Association will release June new home sales figures.

On Thursday the Australian Bureau of Statistics will report on June building permits, a gauge of future residential construction intentions.

The ABS will report on producer inflation on Friday.

The Australian dollar was supported last week after Reserve Bank of Australia Governor Glenn Stevens refrained from talking down the local currency in a speech at the Anika Foundation.

The Aussie succumbed to bearish pressure earlier this month after Stevens warned the markets about the overvalued nature of the local currency. Speaking at the Australian Meeting of the International Econometric Society, Stevens said the Aussie was overvalued, “and not by just a few cents.”

Stronger than forecast core inflation helped bolster the Aussie last week, as investors lowered their bets the Reserve Bank of Australia could pursue another rate cut. Core inflation advanced 0.8 percent in the second quarter, the ABS reported last week. That translated into an annual rate of 2.9 percent between April and June.

The RBA, which has held interest rates at a record low of 2.5 percent for eleven consecutive months, is seeking a “period of stability” to help the economy transition from a broad slowdown in mining investment.

In US data, pending home sales declined unexpectedly in June, the National Association of Realtors reported today. Pending home sales tumbled 1.1 percent. Compared to June 2013, pending home sales were down 7.3 percent.

A heavy slate of US releases this week could impact the Australian dollar. Higher risk US releases could add further support for the greenback, or trigger a broad correction, depending on how market participants view the US recovery.

On Wednesday the Commerce Department will publish its first estimate of second quarter GDP growth. The US economy accelerated at an annual rate of around 3 percent in the second quarter, according to forecasts.

The US economy contracted at an annual rate of 2.9 percent in the first quarter.

In other trading, the Aussie edged higher against the yen ahead of Japanese unemployment and retail trade figures. The AUDJPY advanced 0.12 percent to 95.79. The pair faces initial support at 95.54 and resistance at 95.90.

The Aussie accelerated further against the New Zealand dollar, as the AUDNZD pushed through the 1.10 region. The AUDNZD advanced 0.23 percent to 1.1008, where it is testing the 1.1009 resistance. Initial support is likely found at 1.0963.

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