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Slowing Australia Retail Sales to Keep AUD/USD Rate Under Pressure

Slowing Australia Retail Sales to Keep AUD/USD Rate Under Pressure

David Song, Strategist

Trading the News: Australia Retail Sales

  • Australia Retail Sales to Increase 0.2% in March. Consumption to Narrow to 0.6% from 0.9% in 4Q 2017.
  • AUD/USD Rate Continues to Carve Higher-Lows. Outlook Mired Bearish Trends.
Image of Australia retail sales expectations

A marked slowdown in Australia Retail Sales may keep AUD/USD under pressure as it dampens the outlook for growth and inflation.

The fresh updates mayencourages the Reserve Bank of Australia (RBA) to carry the record-low cash rate into the second-half of 2018 as ‘inflation is likely to remain low for some time, reflecting low growth in labour costs and strong competition in retailing,’ and Governor Philip Lowe & Co. may stick to a wait-and-see approach at the next meeting on June 5 as ‘the low level of interest rates is continuing to support the Australian economy.’

In turn, a batch of lackluster data prints may produce headwinds for the Australian dollar at is dampens bets for an RBA rate-hike in 2018. Nevertheless, a set of above-forecast developments may trigger a bullish reaction in AUD/USD as it puts pressure on the central bank to start normalizing monetary policy.Sign up and join DailyFX Currency Analyst David Song LIVE for a broader discussion on current themes and potential trade setups!

Impact that Australia Retail Sales has had on AUD/USD during the last print

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

FEB

2018

04/04/2018 01:30:00 GMT

0.3%

0.6%

+27

+32

February 2018 Australia Retail Sales

AUD/USD 5-Minute Chart

Image of AUDUSD 5-Minute Chart

Household spending increased 0.6% in February after climbing 0.2% the month prior, with the pickup led by a 1.5% expansion in department store sales. A separate report showed an unexpected decline in Australia Building Approvals, with the figure narrowing an annualized 3.1% during the same period amid forecasts for a 0.3% rise.

The Australian dollar gained ground despite the mixed data prints, with the AUD/USD rate climbing above the 0.7700 handle to end the day at 0.7715.

AUD/USD Daily Chart

Image of AUDUSD daily chart
  • Broader outlook for AUD/USD remains tiled to the downside as both price and the Relative Strength Index (RSI) preserve the bearish formations from earlier this year, but the recent decline in the exchange rate appears to have run its course as the momentum indicator bounces back from oversold territory.
  • The string of failed attempts to break/close below the 0.7460 (23.6% retracement) to 0.7530 (38.2% expansion) region raises the risk for a near-term rebound especially as AUD/USD extends the recent series of higher-lows, with the first topside area of interest coming in around 0.7590 (100% expansion) followed by the 0.7650 (38.2% retracement) region.

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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