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Risk Appetite to Drive Aussie Amid Quiet Economic Docket

By , Currency Strategist
10 June 2011 22:49 GMT

The Australian Dollar AU$

AUD/USD NY Spot Close 1.05498

Risk_Appetite_to_Drive_Aussie_Amid_Quiet_Economic_Docket_body_audusd_risk.png, Risk Appetite to Drive Aussie Amid Quiet Economic Docket

Risk Appetite to Drive Aussie Amid Quiet Economic Docket

Fundamental Forecast for Australian Dollar: Neutral

The Aussie saw broad based losses this week, sliding more than 2.1% against the kiwi and nearly 1.5% against the greenback. The Although the RBA was widely expected to leave rates unchanged at 4.75%, remarks made by central bank governor Glenn Stevens weighed on the aussie after he acknowledged further weakness in the growth outlook for Australia. A weaker than expected employment report on Wednesday sparked a sell-off the aussie after the report showed the economy had added only 7.8K jobs in May, missing consensus estimates calling for a gain of 25K. Full-time employment fell by 22K jobs last month, with the previous month’s print revised down to -57.2K from -49.1K. The data suggested that the softness seen in recent data may not be as mild as expected.

The recent strength seen in the aussie was highlighted when Governor Stevens cited that if the current levels were, “sustained, this could be expected to exert continued restraint on the traded sector,” and further weighing on the export based economy. The AUD/USD pair was unable to see a daily close above the 1.0750 resistance level this week as disappointing data continued to weigh on the Aussie. A descending channel seems to be forming, with reference points dating back to the 5th as the Australian dollar eased off near one-month highs.

Still, a daily chart still sees the AUD/USD holding an upward channel dating back to the June 2010 lows. The pair closed the week just above the 50% Fibonacci extension taken from the May 17th and 25th troughs at 1.0545, where interim support now rests. A break below this level sees subsequent floors at 1.0510 and 1.0480. In order to dispel the overall bullish trend, the pair would need to see a move below the long-term 61.8% Fibonacci extension taken from the 2008 and 2010 lows, just below the 1.02-figure. Topside resistance is eyed at the 61.8% Fib extension at 1.0565 backed by the 1.06-handle and the 100% Fib extension at 1.0645.

The Australian economic docket will be fairly subdued next week, with event risk for the aussie peaking on Tuesday with the NAB Business confidence survey. Price action will be largely dictated by market sentiment after the steep declines seen in global equities this week saw traders jettison the higher yielding aussie for the safety of the greenback. With the recent global risk-on/off environment seen this last week, traders will continue to weigh growth concerns as increased volatility in financial markets continues to heavily influence exchange rates. -MB

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10 June 2011 22:49 GMT