Aussie up on strong Business Confidence

The Australian dollar continues to make inroads against its US counterpart. Currently, AUD/USD is trading at 0.7734, up 0.48% on the day. Earlier in the day, the pair touched a high of 0.7736, its highest level in two weeks.

Australian Business Confidence jumps

The NAB Business Confidence index rose sharply in January to +10, up from +4 beforehand. This reading was well above the long-run average. Confidence improved despite a fall in business conditions, which dipped to +7, which is just above the long-run average. The NAB noted that although business conditions weakened, employment conditions remained in positive territory, which means that businesses are expanding their workforce. As well, the report said that the trend for retail trade and capex is positive. After the contraction in Australia’s economy in 2020, this points to a turnaround in economic conditions.

The positive Business Confidence reading has boosted the Aussie, which has also benefited from the broadly lower US dollar. Investors are hopeful that the global recovery will gather steam, with the Biden stimulus bill moving through Congress, as well as the Covid vaccination campaign. This has raised risk appetite and weighed on the US dollar.

Next up is Australia Westpac Consumer Sentiment (23:30 GMT). The index started the new year on a down note, with a read of -4.5%. This was the first decline since August. Will we see a rebound in the February release? A reading in positive territory could lead to the Aussie continuing its rally.

Last week’s negligible gain in US nonfarm payrolls last week sent the US dollar in retreat against the G-10 currencies. Will we see better news from JOLTS Job Openings later today (15:00 GMT)? Analysts are braced for a weaker reading for December, with the indicator expected to fall from 6.53 million to 6.42 million. A weak reading could add to the US dollar’s woes.

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AUD/USD Technical

• AUD/USD is testing resistance at 0.7717. The next resistance line is at 0.7775
• There is support at 0.7602, followed by support at 0.7525
• AUD/USD has pulled away from the 50-day moving average (MA), which is situated at 0.7622

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