The Australian dollar fell sharply midway through the Asia session after the release of disappointing Australian trade figures. Exports fell 4.6% in May, which was significantly more than the market was expecting. There was also a big downwards revision of April’s overall trade number, with the deficit being revised lower to 780m (prior -122m). The end result for May’s headline number was an expansion of Australia’s trade deficit to 1.91bn, completely missing an expected deficit of 200m. It’s becoming even clearer that exports aren’t going to support economic growth in Q2 like they did in Q1, with today’s numbers tilting the risks even further to the downside.
Following the release of today’s trade data out of Australia AUDJPY was rejected by a key resistance zone around this year’s high. This may suggest that the pair has become top heavy, thus our bias is to the downside in the short-term. In saying that, if the pair was to break through this level – AUDUSD broke through its 2014 high overnight – it may open the door for further gains, as it would confirm a possible reverse head and shoulders pattern (see chart).
Important economic data and events this week
- RBA Governor Stevens speaks on Thursday (0100GMT)
- China June Non-manufacturing PMI (0100GMT Thursday)
- Australian May building approvals (0130GMT Thursday) – exp. 3.2% m/m
- Australian May retail sales (0130GMT Thursday) – exp. 0.0% m/m
- 10-yr bond auction in Japan on Thursday
- RBA Assistant Governor Edey speaks at 0340GMT on Friday
Source: FOREX.com
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