The Australian dollar is on the green for a third day in a row. At Wednesday’s North American session, the AUD / USD is trading at 0.7250, up 0.22% on the day. Today’s main release was the second estimate of US GDP, which fell at an annual rate of 31.7% in the second quarter. This was revised upwards from the first release of 32.9%.
Aussie shrugs while private capital spending slips
Another day, another soft reading in Australia. New private capital expenditure fell by 5.9% in the second quarter, marking a sixth quarterly decline. Manufacturing costs fell by 4.5%, while services slipped by 8.4 percent. Although this figure beat the forecast of -8.2%, this was still the sharpest decline in Capex since 2015. The decline in Q2 reflects the devastating effect on the economy of Covid-19.
The disappointing Capex release comes on the heel of a drop in Construction Work Done, a major release of construction. The indicator fell by 0.7% in the second quarter and has not had a gain since the second quarter 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 sudden Aussie has had a strong week with gains of 1.2% against the US dollar. Clearly, investors are not dumping their assets in Australian dollars despite weak Australian financial fundamentals. This appears to be more a case of weakness in US dollars than Aussie strength. Why do investors feel cool about greenbacks? Covid-19 has not yet been brought under control in the United States, and there is further concern about the prolonged deadlock in Congress over a fiscal stimulus package in support of the battered U.S. economy.
AUD / USD Technical
AUD / USD showed gains in the Asian and European sessions and the upward trend continues in North American trade
- 0.7273 are tested during the day. This is followed by resistance at 0.7307
- There is support at 0.7203. Below we have support of 0.7169
- AUD / USD broke above the 20-day MA earlier in the week