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Aussie Climbs to Higher Ground

H.S. Borji
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Aussie Climbs to Higher Ground

The Australian dollar appreciated on Wednesday, climbing to 2014 highs against the euro and Japanese yen while taking advantage of an overnight cool down for the US dollar.

The Aussie climbed to a fresh 2014 high against the Japanese yen, as the AUDJPY advanced 0.20 percent to 97.03. The pair faces initial support at 96.52 and resistance at 97.13. The AUDJPY has broken from its long-run average, having gained 1.4 percent over the past month. Year-to-date, the Aussie-to-yen exchange rate has appreciated 3.6 percent.

The yen was under pressure early in the week following remarks from Bank of Japan Governor Haruhiko Kuroda, who said on Saturday the central bank would do whatever it takes to fight deflation. The central banker added that monetary policy will remain “increasingly accommodative” for a while longer until the “2 percent inflation target is met and maintained in a sustainable manner.”

The Australian dollar climbed to yearly highs against the euro, which is hitting new trend lows against most of its major peers. The EURAUD rebounded from an intraday low of 1.4096 to reach 1.4133, declining 0.11 percent. The pair is likely supported at 1.4122. On the upside, initial resistance is likely found at 1.4199. The euro-to-Aussie exchange rate has tumbled 4.1 percent over the last three months.

The Eurozone economy stagnated in the second quarter as escalating tensions in Eastern Europe weighed on economic activity, including investment plans. The Ukraine crisis has added another layer of complexity to the Eurozone recovery, which is struggling to gain traction.

The Aussie advanced against its US counterpart, as the AUDUSD rose 0.32 percent to 0.9337. The pair eased off an intraday high of 0.9351. The pair is testing initial resistance at 0.9336. On the downside, support is likely found at 0.9275. The pair is trading right around the 100-day simple moving average of 0.9343.

The US dollar suffered a setback on Wednesday as weak economic data weighed on investor confidence in US economy. New home sales tumbled 2.4 percent in July, the Commerce Department reported on Monday. Meanwhile, core durable goods orders declined 0.8 percent last month, official data showed on Tuesday.

The greenback’s broad rally in recent months hasn’t impacted the Australian dollar, at least not to the same degree that it’s impacted the euro, British pound, Swiss franc, Japanese yen and Canadian dollar. The Aussie-to-greenback exchange rate has tumbled 0.8 percent since June 27. By comparison, the US dollar index has advanced 3.1 percent over the same period.

The dollar index was on its heels on Wednesday, declining 0.14 percent to 82.5.

In economic data, Australian construction activity tumbled faster than forecast in the second quarter, the Australian Bureau of Statistics reported on Wednesday. Construction work done declined 1.2 percent. Economists forecast a decline of 0.3 percent.

The Housing Industry Association on Thursday will present data on July new home sales. Separately, the ABS will report on second quarter private capital expenditure.

The Reserve Bank of Australia will close out the week with a report on July private sector credit.

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