Aussie Business Confidence Remains Low
Rowan Crosby • 2 min read
More weak signs for the Aussie economy as the latest NAB business confidence numbers suggest there is still not that much hope in the air.
Australia June Business Confidence 2 (prior 7) & Conditions 3 (prior 1)
The data has also seen the AUD/USD weaken a touch and it is now red on the day and pushing towards the current swing low. So far the 0.7000 level looks like it might very well be tough to crack for the Aussie and all of the fundamentals are largely pointing that way as well.
There is one shining light at the moment though and that is iron ore. Since the Vale dam disaster, the price of iron ore has been steadily rising. In the late session on the Dalian exchange, futures rose 5.8% to 895 yuan.
Iron ore used to be quite tightly correlated to the Aussie, but in recent times that has fallen away somewhat. There is of course still some sort of correlation as it is one of Australia’s key exports. The mining sector overall continues to be quite a strong suit for the Aussie economy and interestingly seems to be on the opposite of the business cycle on Australia’s east coast.
Nevertheless, the AUD/USD remains at the mercy of the Greenback this week as we await the FOMC minutes and Jerome Powell’s speaking engagements. The USD has been steadily rising since the stronger than expected job reports.
As mentioned, there is a fair bit of technical resistance for the AUD at both 0.7000 and 0.7050. That will be tough to crack. Should the USD keep on rising the obvious levels remain the round number level below at 0.6900.
However, we’ve seen some buying at 0.6950. If price jumps off that level, we would be setting up nicely for a head and shoulders type breakdown.
Bottom line: It remains tough to make a bull case for the Aussie, with the only hope of a rally being a sharp fall in the USD on the back of a bigger than anticipated rate cut in July.