Aussie dips despite strong retail sales

The Australian dollar’s mini-rally has petered out on Friday. AUD/USD is currently trading at 0.7419, down 0.30% on the day.

Retail sales beats forecast

Retail sales is the primary gauge of consumer spending, which is a key driver of the economy. In October, retail sales came in at 1.4 per cent. This follows a gain of 1.6% in September and easily beat the estimate of 0.5 per cent. The strong reading failed to boost the Australian dollar, but nevertheless is another sign that the economic recovery is gaining traction. Other key releases have also been favorable – job creation sparkled at 178.6 thousand in October, while GDP hit 3.2% in Q3, above the estimate of 2.5 per cent. The spate of strong numbers also appears to have convinced the RBA to shelve any plans to lower interest rates to zero or negative levels. This is good news for investors with Australian holdings, as a further cut in rates would make the Aussie a less attractive asset. At the RBA meeting earlier in the week, policymakers maintained rates at 0.10%, which is a record low.

In addition to an improving Australian economy, the Aussie has benefited from a robust China economy. China’s service and manufacturing PMIs improved in November and indicated expansion in both of these sectors. The Asian giant is Australia’s largest trading partner, and stronger Chinese demand has been excellent news for Australian exports. At the same time, China has applied some restrictions on Australian goods, which could put a damper on the trade relationship between the two.

The trading week is over in Australia, but traders should keep an eye on US data, with the release of nonfarm payrolls (13:30 GMT). Analysts are bracing for another drop in NFP, with a consensus estimate of 500 thousand. A reading below figure this could sour sentiment towards the US dollar even further.

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AUD/USD Technical

  • AUD/USD continues to trade close to resistance at 0.7435 and could break above this line before the end of the day. Above, there is resistance at 0.7484
  • There is support at 0.7301, followed by support at 0.7216

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.

Kenny Fisher
Kenny Fisher