Forex Outlook: Australian Dollar Gains in Morning Trading
The Australian dollar was higher on Wednesday, supported by news of a rebound in consumer sentiment to its highest levels in 18 months.
At 05.20 GMT the Aussie was changing at $1.0452, compared with an intraday low of $1.0423 in early Sydney trade and $1.0405 late Tuesday.
AUD was boosted at the very beginning of the Asian trading session after the Westpac Consumer Sentiment index rose 5.2 percent in November, up from 1 percent in the previous print and to its highest level since April 2011. Tim Waterer, currency strategist at CMC Markets, told the Wall Street Journal that the strong consumer sentiment gave the Australian dollar support. The index was at 104.3, a reading above the 100 mark which means consumers are more optimistic than pessimistic about the economy.
On Wednesday the Australian Bureau of Statistics also reported that the Wage Price index rose 0.7 percent in the third quarter from the previous quarter and 3.7 percent on a year-on-year basis.
According to analyst Adrian Foster at Rabobank, “Wages growth has posed a bit of a medium term inflation threat through recent quarters and the RBA [Reserve Bank of Australia] has highlighted the danger in some of their statements. It hasn’t stopped them from cutting amidst the other factors on the radar. The latest reading will ease their concerns on medium term inflation threats but just as higher readings didn’t stop rate cuts so too this lower reading won’t prompt one”.
Mr Waterer opined the Aussie has largely ignored recent events like the Greek debt conundrum or the looming US “fiscal cliff” – a set of mandatory spending cuts and tax hikes are set to begin in January unless the US Congress intervenes. “The Australian dollar has been standing its ground quite well in the past week despite the risk-averse theme present in financial markets,”
**Update 12:30 GMT:**
After reaching a session high of 1.0463 the AUD/USD has plunged 30 pips down in recent hours. At 12.18 GMT the currency was dragged into the negative territory at the 1.0428/28 level. “The market appears to have a bullish bias in the AUD/USD hourly charts. We also have a bearish engulfing that is well resisted by the 1.0454 level.” opined Mark De La Paz, an analyst at FX Instructor. The pair is currently incurring a 0.09 percent loss on the day. Support is centred at the nearby zone of 1.0409, followed by additional corrective means at 1.0373 and 1.0350. In case of a reversion to bullish trend, resistance levels are seen at 1.0468, 1.0491 and finally at 1.0527.
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