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 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
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