AUD/USD recovers on positive data – double top at 0.97

For a change, Australia printed some positive economic data, that comes in contradiction to the recent bout of negative press.

This enabled AUD/USD to continue its recovery after plunging to lows. Have we seen a hammer pattern?

Two important figures were released in the land down under:

1. Building approvals jumped by 9.1%, much better than a rise of 4.1% that was expected, and contrary to the drop of 5.5% recorded in the previous month. While a volatile number, any good sign from the economy outside the mining sector is a positive.
2. Capital Expenditure: This forward looking quarterly indicator actually disappointed with a drop of 4.7% instead of an expected rise of 0.7%. However, the market looked at an even more forward looking sub component: the outlook for 2013/2014. Here, the second estimate actually included an upwards revision of data: 156.5 billion instead of 152.49 billion initially reported. This calms down some of the fears about the end of the mining boom.

Another note: we are nearing the end of the month, where many funds need to re-balance their portfolios. As the Aussie has seen big falls (and the USD big gains), part of the upwards move can be attributed to theses adjustments.

AUD/USD rose from the battleground of 0.9650 all the way to 0.9696, just below the round 0.97 figure that capped it on Tuesday. We could see a double top at 0.97.

Another interesting technical insight is within the quick plunge below 0.9580: this was the trough of June 2012 and the drop below this line sent the pair to levels last seen in October 2012.

The quick recovery can be seen as a hammer pattern on the daily chart. This means that the Aussie can continue recovering.

On the other hand, there are many issues weighing on the Aussie. For example: prices of iron ore which Australia exports have dropped to a 7 month low of $112.90 per ton. After the month truly ends, we will get a sense of the new direction. The dust hasn’t settled yet.

For more, see the Aussie USD forecast, and here’s a live chart:

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