AUD/USD edges up despite Capex decline

The Australian dollar is in green territory for a third successive day. In Wednesday’s North American session, AUD/USD is trading at 0.7250, up 0.22% on the day. Today’s key release was second-estimate US GDP, which decreased at an annual rate of 31.7% in the second quarter. This was upwardly revised from the initial release of 32.9%.

Aussie shrugs as Private Capital Expenditure slides

Another day, another soft reading in Australia. New Private Capital Expenditure declined 5.9% in the second quarter, marking a sixth straight quarterly decline. Spending on manufacturing fell by 4.5%, while services slid by 8.4 percent. Although this figure beat the forecast of -8.2%, this still was the sharpest decline in Capex since 2015. The Q2 decline reflects the devastating effect on the economy of Covid-19.

The disappointing Capex release comes on the heels of a decline in Construction Work Done, a key construction release. The indicator declined by 0.7% in the second quarter and has failed to post a gain since Q2 of 2018. Construction activity has been hampered by the severe economic conditions due to the Covid-19 pandemic.

Despite this week’s soft numbers, the plucky Aussie has enjoyed a strong week, with gains 1.2% against the US dollar. Clearly, investors are not dumping their Australian-dollar assets despite weak economic Australian fundamentals. This appears more to be a case of US dollar weakness than Aussie strength. Why are investors feeling cool towards the greenback? Covid-19 has yet to be brought under control in the US, and there is further concern over the prolonged deadlock in Congress over a fiscal stimulus package to aid the battered US economy.

.

AUD/USD Technical

AUD/USD showed gains in the Asian and European sessions and the upward trend has continued in North American trade

  • 0.7273 has been tested throughout the day. This is followed by resistance at 0.7307
  • There is support at 0.7203. Below, we have support at 0.7169
  • AUD/USD broke above the 20-day MA earlier in the week

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

Currency Analyst at Market Pulse
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.