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Australian Dollar Halts Early Asian Session Downtrend Against Most Majors

The Australian dollar halted its early Asian session's downtrend against most of its major counterparts in mid-morning Asian deals on Friday.

The aussie was a clear underperformer at the beginning of the session following the Reserve Bank of Australia's quarterly Monetary Policy Statement, in which the central bank cut its economic growth forecasts.

Over the next few quarters, the pace of underlying inflation is expected to remain at an annual rate of around 2.5 percent, and would continue to be consistent with the inflation target.

However, inflation could be higher than forecast if wage growth does not edge down as expected or if productivity growth is weaker than anticipated.

The aussie losses were limited to some extend following the release of better-than-expected trade data from China. Being the biggest trading partner of China, the Australian currency usually affects in accordance with the major economic data from China.

China posted a merchandise trade surplus of $29.2 billion in January, the National Bureau of Statistics said today. That beat forecasts for a surplus of $24.20 billion following the $31.62 billion surplus in December.

Exports surged 25.0 percent on year - also topping expectations for an increase of 17.3 percent after rising 14.1 percent in the previous month. Imports spiked an annual 28.8 percent, beating forecasts for a gain of 23.5 percent after adding 6.0 percent a month earlier.

Analysts caution that the annual figures are skewed because the Lunar New Year holiday was in January last year, as opposed to February this year.

Traders' appetite for risk was faded following the European Central Bank President Mario Draghi's dovish rhetoric on Thursday.

Draghi said European economic activity should gradually recover later in 2013, but he warned that the risks surrounding the economic outlook for the euro area continue to be on the downside.

Draghi's remarks came after the ECB left interest rates unchanged despite concerns about the recent appreciation in the value of the euro.

The Australian dollar approached near the 1.03 level against the US dollar amid data, having advanced from a fresh multi-month low of 1.0258 hit earlier in the session.

The pair then moved in a tight range of 1.0285/1.03 area and a likely bearish extension could help it to re-test the 1.0150 support. If the aussie reverses downtrend, likely resistance is seen around the 1.0350 area.

The aussie that reached a session's low of 95.93 against the yen and 1.3058 versus the euro earlier in the session held steady in succeeding trading hours. The Australian currency is now hovering near Thursday's closing values of 1.3034 against the euro and 96.30 against the yen.

The Australian currency also recovered modestly from a 3-1/2 month low of 1.0245 against the Canadian dollar on Friday morning in Asia. The aussie-loonie pair is now hanging in the 50.0 percent retracement target at 1.0270, with 1.0190 seen as the next likely support level, its 38.2 percent target.

Erasing some of Thursday's sharp gains, the Australian dollar reached as low as 1.2314 against the New Zealand dollar before holding steady in early Asian deals Friday. Any recovery attempt could help the pair pierce the 1.24 resistance. However, a resumption of recent sessions' bearishness could help the pair revisit the 50.0 percent retracement target at 1.2227.

Looking ahead, China's CPI and PPI-both for January are the key data to watch in the remaining trading hours in the Asian session.

Swiss jobless rate for January and retail sales for December, German trade balance and Italian industrial production-both for December are expected to influence trading in the European session.

Canada's housing starts, jobless claims-both for January and the U.S. trade balance, wholesale inventories data-both for December are expected to garner market attention in the North American session.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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