AUD/USD: 2 reasons why the Australian dollar is falling today
- The AUD/USD is falling today as traders react to the stronger US dollar.
- The dollar has gained ahead of the nonfarm payroll data expected later today.
- The weak Australia's retail sales numbers have also played a role.
The Australian dollar (AUD/USD) is down by about 0.30% as traders react to the relatively strong dollar and weak Australian retail sales. It is trading at 0.7160, which is lower than this week’s high of 0,7200.
Australia retail sales disappoint
In August, a new wave of coronavirus illness started in Australia. Particularly, the wave happened in Victoria and Melbourne, two of the country’s biggest states. To curb the spread, the government initiated strong lockdown measures.
Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.
The impact of these measures is evident in the country’s retail sales numbers. According to the Australian Bureau of Statistics (ABS), the overall retail sales dropped by 4% in August. That was the first time in five weeks that the retail sales were in the negative zone. It was also the lowest reading since April this year, at the height of the first wave of the pandemic.
According to the bureau, food retailing declined by 0.2%, mostly because of a 2.9% decline in liquor retailing. Supermarkets and other specialised food retailing rose by 0.1% and 0.5%, respectively. Meanwhile, household goods declined by 6.0% as most people stopped buying electrical, hardware, and furniture products.
Other data showed that clothing and footwear declined by 10.5% while department stores declined by 8.9%. With more people urged to stay and work from home, volume of goods sold in cafes and restaurants declined by 6.6%. At the same time, the data shows that most of the decline was in New South Wales, which includes Victoria, Melbourne, and Sydney.
The impact of the second wave was also seen yesterday when the country released the September PMI data. Numbers from the Australian Industry Group (AIG) showed that the manufacturing index fell to 46.7 from the previous 49.3. Another reading from Markit showed that the PMI rose to 55.4, which was slightly lower than the 55.5 that analysts were expecting.
The AUD/USD is also reacting to a relatively stronger US dollar. The dollar index, which measures the strength of the greenback against other peers, is up by more than 0.25%.
The rally of the greenback is probably because of three key factors. First, in the United States, Hope Hicks, a key close aid to Donald Trump tested positive for the coronavirus. Subsequently, the president has started a period of quarantine. This, coming a few weeks before the election, could increase risks of turnout.
Second, Democrats in congress yesterday voted for a new stimulus package worth more than $2.2 trillion. Since the bill did not have an input from Democrats and White House, it will be unlikely to pass in the senate. As such, investors are worried about the state of the American economy.
Finally, the dollar is gaining ahead of the US nonfarm payrollsdata that will come out today.
AUD/USD technical outlook
The four-hour chart shows that the AUD/USD reached a high of 0.7210 yesterday. This price was along the 50% Fibonacci retracement level. Today, the pair has dropped to the current level of 0.7160. It is attempting to move below the 15-day exponential moving average and is also along the 38.2% retracement level. Therefore, the pair is likely to continue falling as bears aim for moves below 0.7000.