The AUD/USD Advances after October U. of Michigan Confidence Index Unexpectedly Climbs

THE TAKEAWAY: The October U. of Michigan Confidence Final Index Unexpectedly Climbs > Better Outlook about the State of the Economy>AUD/USD Gains

The Thomson Reuters/ University of Michigan final index, a leading indicator assesses consumer confidence regarding personal finances, business conditions and purchasing power, surprisingly surged to 60.9 in October from 59.4 in the previous month. The final figure of consumer expectations for six months from now exceeded the median forecast as 66 economists polled by Bloomberg Survey had called for the print of 58. Projections ranged from 55 to 60. The preliminary reading of consumer sentiment for the month was 57.5. A rebound in sentiment gauge during recent months after sinking to the lowest level since 1980 in August reflects consumers’ better outlook about the state of the economy and stronger expectations on business conditions, employment and income.

U. of Michigan Confidence: January 2010 to Present

Prepared by Trang Nguyen

Economic conditions index advanced to 75.1 from 73.8 in August, while economic outlook index climbed to 51.8 from 47.0. Inflation expectations for one year and five year ahead remained unchanged in the month at 3.2 percent and 2.7 percent, respectively. Purchases edged up 0.6 percent in line with expectations, following a 0.2 percent advance in the preceding month. Incomes, however, rose less than forecasted. Michigan sentiment index on the upward trend is a good sign that the world’s biggest economy has been on pace of recovery. Yesterday’s report issued by Commerce Department also showed that real gross domestic product accelerated at an annual rate of 2.5 percent in the third quarter of 2011, led by gains in personal consumption expenditures, nonresidential fixed investment, exports and federal government spending.

AUD/USD 1-minute Chart: October 28, 2011

Charts created using Strategy Trader– Prepared by Trang Nguyen

Market participants’ reactions demonstrates tremendous shift on sentiments these days when European bailout fund to fight the regions’ debt crisis iss reaching to conclusion and domestic fundamental data has come out stronger than last few months. The U.S. dollar loses its ground as investors have been seeking risk-correlated and high-yielding assets. As can be seen from the AUDUSD one-minute chart above, the currency pair extends its upward momentum after the Michigan index printed better than estimate. The AUD/USD climbed approximately 50 pips from 1.0680 to 1.0730 within thirty minutes. The Relative Strength Indicator (RSI) above 70-level twice following the release signaled that foreign exchange traders have been aggressively buying the aussie while cutting their dollar holdings. At the time this report was written, the aussie traded at 1.07156 U.S. dollar.

--- Written by Trang Nguyen, DailyFX Research Team for DailyFX.com

To contact Trang, email tnguyen@dailyfx.com