The Australian dollar has reversed directions on Wednesday, after registering three winning sessions. Currently, AUD/USD is trading at 0.7726, down 0.16% on the day.
Australian Consumer Confidence rises
Australian confidence indicators have enjoyed a good week. In February, the Westpac Consumer Confidence Sentiment index rebounded in impressive style, with a gain of 1.9%. This follows a sharp decline of 4.5% beforehand. The December reading marked a 10-year high, so the Australian consumer is showing a high level of confidence in the economy. Importantly, the index is now 14.2% higher on a year-to year basis, which means the consumer confidence is comfortably higher than its pre-pandemic level. The survey noted that the “light-handed” lockdowns had effectively contained Covid-19, which had contributed to the increase in consumer confidence.
The positive consumer confidence release follows NAB Quarterly Business Confidence, which rose to 10 index points, up strongly from 4 index points beforehand. Confidence improved despite a fall in business conditions, which dipped to +7, which is just above the long-run average. The NAB report 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, the economic picture in 2021 is definitely looking brighter.
The US releases key inflation numbers for January later in the day (13:30 GMT), and the readings could affect the movement of AUD/USD. Headline inflation is projected to tick lower to 0.2%, down from 0.3% beforehand. Core CPI is expected to rise slightly to 0.2%, compared with the current 0.1%. On an annualized basis, this would be unchanged from the 1.6% gain recorded in December. A higher print than this figure could weigh on the US dollar.
- AUD/USD is slightly above the 0.7717 line, but it’s too early to tell if this line has switched to a support line. 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 0.7629
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