AUD / USD – Business Confidence pushing Aussie Up

Australian NAB Business Confidence, the benchmark used for gauging sentiment of the market, gave a strong reading of 3 versus -9 in November. Readings from Dec is the highest in 4 months, and is a great indication of bullish sentiment in the Australian market. This is a significant breakthrough considering that market sentiment all around the world was lower due to the looming Fiscal Cliff (which has since been resolved albeit temporarily) – US Consumer Confidence was at 65.1 in Dec vs 70.0 expected, while German ZEW Sentiment Survey (current situation) was also lower at 5.7 vs 6.0 expected. Though to be fair, Euro-Zone ZEW Economic Sentiment fared much better, reading 6.9 vs -11.5 expected. Hindsight is 20/20, but that could be one of the fundamental drivers behind EUR’s rally in early 2013 Jan.

OANDA Currency Heatmap shows EUR being the biggest winner against all major currencies within the past month, which is certainly no fluke considering the surprising bullish sentiment Europeans are showing in December. We can also see that Oceania currencies are not far behind, ranking 2nd and 3rd in the bullish competition. With Aussie confidence much higher than expected, we could expect AUD/USD to remain aptly supported against strong sell-offs in the near-term.

30 Minutes Chart

Market agrees with that sentiment, with AUD/USD rising 20 pips from 1.042 to 1.044. However, it is of concern that price stalled just at the support/resistance around 1.044. 1.042 now becomes a critical support for bulls, as failure to hold onto the level will put the bigger downtrend theme back on track. Should 1.042 holds, failure of 1.044 will seem less important as the uptrend from the recovery of 1.039 low will still look intact.

Daily Chart

Daily chart shows some support around 1.04, with 1.06 resistance again in focus. If the assumption that NAB confidence  supporting AUD/USD holds true, we should be able to see 1.04 holding without any issue, with 1.06 as upside target, and an eventual break for the bullish trend from Oct 2012 Lows to continue.

However, that is a very long shot for a business confidence reading based on Dec’s sentiment. An alternate view is that though the sentiment was indeed bullish, we’ve seen price discounting the bullishness as we moved from 1.035 to just under 1.06 in 2013. Even if sentiment remains bullish, we’re heading into uncharted territories next week with RBA Rates (Tuesday) and Employment data (Thursday) in the docket. Any surprises from these 2 heavy hitters could swing confidence and sentiment easily to either side, negating whatever NAB Confidence tells us. Nonetheless, technical reference points remain. 1.04 could prove to be a fiercely fought battleground in the days to come.


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