Retail Sales Rebound
AUD bulls received a boost this week as, despite still-subdued wage growth and generally weak household consumption, Australian retail sales rebounded over November.
The reading rose 0.4% in November, outperforming expectations of a 0.3% increase driven predominantly by gains in household goods and clothing which have both been rising sharply since October.
AUD has been rising steadily over the last two weeks due to a combination of a weaker US Dollar in response to dovish comments by Fed chairman Powell and improved risk sentiment around the US/China trade deal as a second round of talks got underway this week in Beijing.
Construction Hits 6 Year Lows
However, the data wasn’t all positive for AUD this week as the AIG construction index for December fell another 1.9 points to stand now at 42.6, levels not seen since June 2013. The housing sector continues to be a key issue for the RBA and one that it has consistently flagged at its monthly rates meetings.
However, with labor market conditions remaining strong and wage growth showing signs of improvement (last reading 2.7% year on year, up from the 1.5% lows of 2017) there is a hope that progress in the US/China trade negotiations could fuel better momentum in the Australian economy.
After piercing through the 2015 low of .6826, AUDUSD has since reversed sharply higher is now making good headway to the topside. The formation of a large bullish weekly engulfing candle at the double bottom has pulled price back above the .7015 level, bringing the .7380 closing December 2018 high into focus as the next key resistance to watch. Above here and focus will be on a move back up to retest the broken bullish trend line from 2015 lows.