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Australian Dollar Volatile after Worse Than Expected Retail Sales

Australian Dollar Volatile after Worse Than Expected Retail Sales

Daniel Dubrovsky, Contributing Senior Strategist


Talking Points

  • The Aussie Dollar experienced a jolt of volatility and paused its advance after retail sales
  • Store transactions recorded 0.4 percent (QoQ) in 2Q versus 0.5 percent expected
  • July US NFPs are key upcoming event risk for the sentiment-linked currency

Having trouble trading the Australian Dollar? This may be why.

The Aussie Dollar briefly halted its advance following a disappointment in Australia’s retail sales figures. In June, store transactions increased 0.1 percent (MoM) versus 0.3 percent expected and 0.2 percent in May. Meanwhile, retail sales excluding inflation gained 0.4 percent through the second quarter of 2016 versus 0.5% estimated and 0.5% in the first quarter. Even though the data missed expectations, the AUD/USD resumed its advance.

Earlier this week, the Reserve Bank of Australia lowered interest rates after a choppy inflation report. The central bank said that prospects for prices returning to target and maintaining sustainable growth have been improved by the cut.

Since today’s data comes after the RBA’s influential decision, perhaps the markets are curbing the assessed importance of this moderate data to find more meaningful – and surprising – updates that will dictate future monetary policy and risk trends. This Friday, the US will releases July’s non-farm payroll figures which could potentially be a volatile event for the sentiment-linked currency.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing a reading that roughly 56 percent of open positions in AUD/USD are short. The SSI is a contrarian indicator at extreme levels, implying further AUD/USD strength ahead.

Want to learn more about the DailyFX SSI indicator? Click here to watch a tutorial.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.