Aussie rises on solid construction data

The Australian dollar has resumed its upswing on Wednesday, after showing no change a day earlier. In the European session, AUD/USD is trading at 0.7779, up 0.33% on the day.

Construction Work Done rebounds

There was encouraging news from the construction sector on Tuesday. Construction Work Done had sputtered, racking 10 straight losing quarters. The indicator finally burst through in Q1, posting a strong gain of 2.4%, above the consensus of 2.2%. This has given the Aussie a boost, and the currency is within striking distance of the round number of 0.7800.

With no tier-1 events out of Australia this week, US key releases could have a magnified effect on the direction of AUD/USD for the remainder of the week. The highlight is US Preliminary GDP for the first quarter, which will be released on Thursday. The initial estimate came in at 6.4%, and the consensus for the second estimate has been upwardly revised to 6.5%. Durable Goods is expected to slow to 0.7% in April, down from 1.0%.

Investors will also be monitoring Core PCE Price Index, which is the Federal Reserve’s preferred inflation gauge. The index is expected to rise to 0.6% in April, up from 0.4%. With the market still nervous about higher inflation, despite Fed assurances, a higher reading than the consensus could stir up investor jitters and boost the US dollar.

The Fed continues to trot out Fed governors to repeat the message that it remains committed to maintaining its ultra-accommodative policy and current QE levels. Inflation surged in April, which led to speculation that the Fed might contemplate scaling back QE. This gave the US dollar a brief boost earlier in May, but the market appears to have accepted the Fed line that higher inflation is transitory and any tightening of policy is a while off. This has put pressure on the US dollar viz-a-viz the major currencies, as investors look for alternatives other than the dollar to park their assets.

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AUD/USD Technical

 

 

  • AUD/USD is testing resistance at 0.7792 and 0.7854
  • On the downside, there are support levels at 0.7690 and 0.7650

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-event

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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