The Australian dollar has come managed to climb the charts on the back of USD weakness today, but all is not as rosy as it seems and it’s becoming clear that the Australian economy is really struggling after all three PMI readings this month fell below expectations. Manufacturing and Services PMI readings showed large drops which had many worried, and now Construction PMI data out today came in at 46.6 (51.6 prev) showing a contraction in the sector. This is nothing new that the Aussie economy is struggling but it does lend weight behind the idea that the Reserve Bank of Australia should look to prop up the economy and an interest rate cut may be needed here. However, the property market will be a major concern with housing approvals jumping on the most recent reading on weaker interest rates over all.
Technically on the charts the AUDUSD has broken out of the bearish widget that it was forming and has pushed up to resistance at 0.7690 and is looking very unlikely to continue this movement unless we see further USD weakness. For me a pullback is more likely on the cards given the weak data that continues to come out of the Australian economy and shows no signs of letting up, so support at 0.7638 has become all the more tangible in recent times. I would also watch the 50 day moving average which has been acting as dynamic support and resistance as well for the market.
The New Zealand dollar was spoken about heavily yesterday, and for good reason as pressure was finally building and it seemed that we may indeed see a break out for the NZDUSD. After today it can be confirmed that the bulls have looked to take back control after markets pushed through the ceiling of resistance at 0.7311. This has been lead in two parts, firstly by the shocking ISM non-manufacturing PMI which has shown a bigger drop than anyone expected in the USA to 51.4 (55.0 exp). This has had a large impact as USD selling as a whole was heavy today. Additionally we saw positive data out of the NZ market as manufacturing sales q/q lifted to 2.2% (-2.6% prev), and will be a welcome note to the NZ economy which has for the most part been struggling as of late and looked like further rate cuts may be on the horizon. It will be hard to justify them now given the recent economic turnaround, but the NZD will remain a concern for the RBNZ and it’s likely it will look to talk down the high flying NZD.
Glancing at the technical’s and as I mentioned yesterday the next level of resistance is looking likely at 0.7475. Any pulls backs are a real possibility after yesterday’s move, but I would anticipate support to now be formed at 0.7311 and the likelihood that the previous bullish trend line will hold up further movements. The 20 day and 50 day moving average are also providing support and are just below the trend line and likely to prop up any further drops and assist bulls.