AUD levels ahead of CAPEX data

Australia’s Q2 CAPEX report is almost here, so we look at the major support and resistance levels for four important AUD pairs.

To recap:

The release of Q2’s private capital expenditure figures could prove to be a big deal for the Australian dollar. In that respect, it’s very important to look beyond the headline figure (private CAPEX is expected to fall around 0.9% in Q2 to around AUD142bn) as it can mask underlying strength or weakness in the overall report.

Q1’s report was a perfect example of this. A 4.2% decline over the quarter was significantly worse than an expected 1.5% fall, but the internals of the report was fairly robust. Equipment, plant and machinery capital expenditure jumped 2.8%, which was better than expected and was a positive indicator for GDP, and planned services spending, which is a massive chunk of non-mining investment, was up an impressive 12%. And, while mining investment fell off a cliff, it didn’t come as a surprise to the market.

What to look out for:

• Headline CAPEX figure is important but it’s not everything - expected to fall around 0.9% in Q2 to around AUD142bn
• Internals of the CAPEX data – what specific sectors are doing
  - For non-mining investment, planned services spending is the number to watch
  - For mining investment, look at the big sectors (e.g. equipment, plant and machinery CAPEX)
• Capital expenditure plans are also very important

AUDUSD

AUDSUD is hanging just below some short-term resistance around 0.9355. A strong CAPEX report could easily add 50bps to this pair, thus it could punch through the aforementioned resistance level. Above there, we are watching recent highs around 0.9475 and 0.9505. On the downside, there’s a key short-term pivot zone around 0.9280/0.9305,but the key test for the pair lays around 0.9230/35.

AUDJPY

This pair’s stellar run higher for most of this month has put it in a slightly vulnerable position. There is a possible double-top in price which may highlight some underlying weakness and supports the case for a retracement lower in the near-term. In this case we have our eyes on 96.45. In the event of a stronger report today, AUDJPY’s upward trend may resume if 97.20 is broken.

AUDNZD

AUDNZD is another pair in a precarious position. It remains in a long-term upward trend but is finding some stiff resistance around 1.1180. A strong report today could reignite the pair, while a weaker than expected set of CAPEX figures could confirm a short-term bearish H&S formation in price (neckline is around 1.1120/25).

EURAUD

EURAUD is holding in a long-term downward trend, but it’s looking slightly oversold in the short-term. Its yearly low around 1.4095 should provide some support for the pair, but it may not hold up in the face of widespread AUD strength. On the upside, there are a few short-term resistance zones, but they would be no match for significant AUD weakness on the back of weak CAPEX figures.