The Australian dollar has been moving sideways against the US dollar over the last three months as investors are waiting for a strong boost to drive the market higher. The capital expenditure data for the first quarter is coming out on Thursday at 01:30 GMT. In the meantime, the aussie is forming a positive structure in the longer view, on the back of positive vaccine news, which have opened a pathway to a safe Australia.
Capex is predicted to rise by 2%
Private capital expenditure rose by 3% q/q in the three months to December, after a 3.1% decline in the preceding sessions, beating market forecasts of a steady reading. The last release was the largest increase in private capital spending since 2012, supported by spending on building and structures. For the first quarter of this year, capex is forecasted to rise by 2% and the recovery in equipment spending appears to have extended into 2021, while businesses are optimistic, and activity is rebounding.
The nation’s economy advanced 3.1% in the three months to December, surpassing expectations of 2.5%. This figure was the first time in 60 years that GDP has grown by more than 3% in two consecutive quarters on the back of massive monetary and fiscal stimulus. However, the annual rate of change in GDP is expected to have a contraction of 1.8% from -1.1% before. In case of a positive number in capex, the GDP number (coming out on June 2) may advance, showing that some recovery is on the cards during these crucial periods.
During May’s meeting, the RBA left its cash rate unchanged again at 0.1%. Members confirmed their support for loose monetary conditions until 2024 when inflation is back within 2%-3% target. CPI is predicted to rise above 3% in the second quarter after the positive coronavirus news. The next policy meeting will take place on June 3.
Aussie continues to move in consolidation area
From the technical point of view, aussie/dollar is moving within a trading range of 0.7570-0.7886 over the last three months, remaining below the more-than-three-year low of 0.8006. Upbeat numbers are likely to propel the price higher above the 0.7886 strong resistance, hitting the 0.8006 barrier and the 0.8130 level, registered in January 2018.
However, the price could be at risk of a bearish retracement if the capital expenditure number disappoints. Price action is likely to rechallenge the 0.7570 support, before meeting the 200-day SMA at 0.7510. A move below this level could challenge the 23.6% Fibonacci retracement level of the upward wave from 0.5505 to 0.8006 at 0.7415. A significant step below this line could take the market towards the 38.2% Fibonacci of 0.7050, shifting the outlook to bearish.
