Aussie dips on soft construction data

The Australian dollar has dipped lower in the Wednesday session. Currently, AUD/USD is trading at 0.7359, down 0.15% on the day.

Aussie rally fizzles as construction work declines

The Australian dollar has taken a pause on Wednesday, after a huge gain of 1.0% a day earlier. The culprit was a soft reading from Construction Work Done, a key gauge of the construction industry. The indicator fell by 2.6% in the third quarter, which was a sharper contraction than the forecast of -2.0%. This marked a ninth straight quarter with a decline, as the construction sector has been marked by a prolonged contraction. The industry has been in decline since mid-2018, and the Covid pandemic, which has resulted in numerous lockdowns, has only aggravated an already difficult situation. Still, even with the weak release, AUD/USD has sustained minimal losses on Wednesday.

The weak construction data ended a strong upswing for the Australian dollar, which touched a 10-week high earlier on Wednesday. The currency climbed 1.1% on Tuesday, as investor risk sentiment jumped on the news that Janet Yellen has been tapped to become US Treasury Secretary in the Biden administration. Yellen will bring with her a wealth of experience which she accumulated as head of the Federal Reserve under President Obama. As well, investors were pleased with the news that the long-awaited transition from the White House to the Biden team is underway.

Market focus will now shift to Australia Private Capital Expenditure, a key gauge of activity in the private sector. This indicator has also been marked by contraction, with six consecutive declines. The reading for Q2 came in at -5.9%, its largest decline since 2015. The pace of decline is projected to ease in the third quarter, with an estimate of -1.5 per cent.

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AUD/USD Technical

  • AUD/USD faces resistance at 0.7390. Close by, there is resistance at 0.7421
  • There is support at 0.7306. Below, we find support at 0.7252
  • AUD/USD easily broke above the 10-day MA line on Tuesday, a sign of an upward trend

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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