AUD recovers after a correction against the USD

The AUD slipped against the US Dollar from the 4 month high since Nov 2009. The drop was driven by the government home loans data which fell more that expected falling to 1.8% from previous figure of 7.3%. The Reserve Bank of Australia (RBA) also raised the interest Cash Rate for the fifth consecutive time from 4% to 4.25%. The rate hike was not a surprise for the investors, however, this the rate is building pressure on the first time home buyers. The RBA rate hike has been a measure to control inflation. The increase in demand for the Australian minerals like coal and iron ore can also play a positive role in Australia’s growth strategy. The Australian unemployment rates were also inline with the markets expectations at 5.3% without change to the previous figures. The rise in dollar rate can also be attributed to the stable addition of jobs which supplemented to 19,600K but could not upbeat the market expectation which was at 20,100.

From the Technical point of view, the AUD has covered 61.8 % of the upward movement since Monday’s fall from 0.9386 against the US dollar. On the near term if it breaks the resistance at 0.9370, the further resistance could be at 0.9402. The downside support could be at 0.9214. As the week does not bring major fundamental news for the AUD, the building permits data for the USD could have some impact on the Australian dollar.

Mohammed Rabbani