Australian Dollar Strengthens

The Australian Dollar strengthened after a three day losing streak after a government report revealing a rise in home building approvals, climbing twice as much as economists have expected in November 2006 figures show. The report caught forex trader’s attention and have increased bets that the RBA (Reserve Bank of Australia) will lift interest rates this year. The Australian dollar traded at about 78 cents at 5pm Sydney time compared with late New York trade last Friday night to lows of 77.88 cents. Recall that the Australian dollar reached 22 month highs on January 3 of 79.80 cents. Currency traders see about a 60 percent chance that the RBA will increase interest rates by mid-2007 compared with 48 percent late last week according to the 30-day inter-bank interest rate futures contracts. The three day drop in the Australian currency was largely due to two factors, a drop in commodity prices and last Friday’s strong US jobs data. Employers in the U.S. added 167,000 workers last month, following a 154,000 increase in November, the government said last Friday. Meanwhile, today’s building approvals figures from ABS (Australian Bureau of Statistics) have revealed that the number of approvals to build or renovate houses and apartments rose 4.1 percent from October to 12,739. The performance of construction index rose 4.5 points from November to 52.1, the Australian Industry Group and Housing Industry Association said in a report released in Canberra today. A reading above 50 indicates the building industry is expanding.

Australian Dollar Searching for Bottom

Another day of trading the Australian Dollar… plenty of action for day traders. The Aussie spent the day searching for a bottom. The chart is a 2 day 1 minute chart. After falling sharply from highs of 7980 the dollar is falling back to a reasonable price. Plenty of opportunities to short the dollar over the past day or so. Earlier today the dollar bounced off its current support - around the 7810’s 7820’s… and right now - at 7pm Sydney time it is in a trading range between 7820/40. The dollar fall seems to have lost momentum over the past 24 hours so the Australian dollar is now seaching for the bottom which could be where it is now. If you are bullish, time to go long, if you think the dollar can still break current support then go short.Some traders reckon the dollar can recover by next week back up to 79 cents. If the economic data released next week is conducive then there is a high probability that it will. The main fundamental cause for the Aussie dollar declaine is the stronger US dollar which was energised by a rise in inventories and an increase in November of the US non-manufacturing index. However in New York trade later tonight, the December non-farm payrolls will be released - might send the dollar moving again. The Australian dollar hit a low ofUS$0.7813 cents today.

Local Australian data to watch out for next week: November building approvals at 11.30 Sydney time. (Economists say they expect a 2 percent rise which compares to a fall of 7.5 percent in October 2006. Next Thursday is December’s employment data, which may influence the Reserve bank’s rate decision on the 7th of February.

Aussie Dollar Reaches Highs

Happy New Year to all my readers! I hope you have a successful year in your forex trading. It has only been 4 days into the new year and we have seen the Aussie dollar pass the resistance it was grappling with in the final days of 2006. The Aussie dollar has reached highs of up to US$0.7980 cents yesterday - even with no apparent economic data. Oh boy - but once some economic data came out of the US, reality came back to the trader’s heads and the dollar started falling… sharply. At 5pm this afternoon, the Aussie dollar had fallen down to 79.10 cents from 79.80 cents (The charts above and below are two day 1 minute charts). And at 9.23pm the dollar fell even more down to 0.7836. Note 0.7980 as a strong resistance point in future, just as how 79.10 acted as support in today’s fall for a few hours before falling sharply. Anyone who was long as a result of listening to all the talk about the AUD/USD pair making it to 80 cents this year are acting way prematurely. The market needs to see a little more proof before it is a sure bet.

It was a surprise for me to see the Aussie dollar rise so much without so much as any piece of economic data. John Kyriakopoulos from the NAB said that the rise was due to, thin trading, lack of data and favourable carry trades. He reckons fair value for the aussie is somewhere in the US$0.7770 cent range. The US dollar was stronger across all currencies overnight as US manufacturing data was especially strong. Also, Federal Open Market Committee’s (FOMC) December minutes decreased trader’s expectations of a near-term U.S. rate cut. Sue Trinh, a currency strategist at RBC Capital Markets says that, “I wouldn’t rule out a move to US$0.80 in the short term. A break above US$0.80 should generate an unencumbered rally towards US$0.8200.” She’s been really bullish about the dollar for a while now (depends what her definition of short term is…). I would expect the dollar to consolidate in the next few weeks.