The Australian dollar traded in a tight range overnight as forex traders stayed on the sidelines due to the holidays in China, the U.K. and the US.
“But we might see a lot of changes and movements today with a raft of important data releases across the globe,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
Locally the building approvals and the ANZ weekly consumer confidence survey will be released today.
“Both these data points are relevant to the conversation, which is turning out to be about a possible household and domestic slowdown across the Australian economy in 2017 and 2018,” McKenna said.
He pointed out that last week’s construction work done data suggests residential construction was, or is, slowing faster than anticipated.
“This is important in the context of the RBA’s outlook which says it will be a factor in Australian growth accelerating to potential at or above 3%,” McKenna said.
The consumer confidence and the associated retail sales later this week will also be worth watching.
“It will be interesting to see if consumers are actually spending or not, especially since the government’s budget forecasts the savings rate to continue to fall,” McKenna said.
Traders will be eyeing both data releases for pointers to just where the economy is or is heading.
From his perspective, McKenna said he believes that the authorities – APRA, the RBA, Treasury and the Government – are nudging households toward fear of debt and slowing spending and consumption.
“They are thus nudging the domestic economy, which is dominated by consumers, toward a recession,”
“It’s not guaranteed. But behavioural nudges are strong signals and the RBA’s focus on house prices, APRA’s tightening of credit, and the government’s tax on the banks all point in the same direction,” McKenna noted.
In the meantime, he said this week’s data flow may dictate the direction for the Aussie dollar.
“There is much negativity growing. But a solid week of data would lift the Aussie dollar from support here at 0.7400/20,” he said.
Weak data, however, will knock the Aussie back to 0.7330 support, McKenna added.
And of course even before we get to non-farms in the US on Friday there are plenty of catalysts for trade today and tonight for forex traders including the Japanese employment and retail sales, French GDP, German import prices and CPI.
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