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AUD surges on data, sentiment

Summary:

  • Asian session takes Nikkei, Hang Seng higher as uncertainty abates
  • AUD is a star on the fx market as data surprises
  • AUDUSD tests 0.80 but crucial data still ahead

The Asian session has been relatively upbeat as uncertainty regarding North Korea has abated a bit. A lack od radical response from the US with Trump only issuing a statement that "all options are on the table" has been seen a step to reduce tensions and move the ball to North Korea’s field again. So unless we have another provocation from the regime soon, markets may move on. This has helped equity indices and risk markets alike with the AUD by far the strongest G10 currency today. 

The Aussie used not only sentiment but also strong domestic data. Building permits for July were not as dire as expected (-13.9% y/y vs -16.6% anticipated) but the Q2 construction output surged by 9.3% q/q (annualized) vs a lackluster 0.9% in the first quarter and expectations of +1%. That’s important because we have the GDP data in Australia for the second quarter next week, one of the most important figures in the calendar. Much higher construction output could drive the GDP up. However, it’s important to stress that more important release will take place tonight in Australia: capital expenditures in the second quarter and only after this data final expectations ahead of the GDP will be shaped. 

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AUDUSD used 0.7775 level as a support and could aim higher in the future - at least that’s the technical picture. Source: xStation5 

So far so good for the AUDUSD: the pair looks bullish on the weekly chart as it made through the key resistance of 0.7775 and used it as a support subsequently. The next major level is very remote above 0.8650 so bulls can feel encouraged. 

Having said that keep in mind that speculative positioning on the AUD is at the highest point since early 2013 and we also have full calendar of the US data ahead, especially ADP report (today) and NFP report (Friday). 

 

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