AUD/USD: It is not all that bad in Australian retail sales data
Macroeconomic overview:
- Thursday’s data from the Australian Bureau of Statistics showed retail sales dropped 0.6% in August, confounding expectations for a 0.3% increase. July was also revised down to show a 0.2% fall.
- The 0.8% slump in July and August is the biggest back-to-back fall since October 2010. The AUD/USD fell from a one-week high of 0.7875 set on Wednesday.
- Australia’s retail sector had shown some signs of life earlier in the year, but that recovery was short-lived as sluggish wages and household incomes sapped spending power. The data casts a shadow on the Reserve Bank of Australia’s forecasts for the economy to accelerate at 3% over the next two years.
- The RBA has long feared ballooning debt in Australia’s red-hot property sector was limiting consumers’ ability to spend elsewhere in the economy, one reason it has held rates at an all-time low 1.50% since August 2016.
- The ABS figures showed falls across every single state, a rare occurrence, with food, eating out and household goods leading the losses. Department stores did gain 0.7%, but that followed a sharp drop of 2.6% in July.
- Not all is doom and gloom. The ABS’s experimental estimates of online retail turnover jumped 6.3% in August from the previous month and were rapidly catching up to last year’s Christmas sales.
- The online numbers are not yet part of the headline retail series and are not seasonally adjusted. The ABS estimates the sector is worth around AUD 13 billion a year, compared to AUD 300 billion in traditional sales. Online activity is, however, expanding much more rapidly.
- A separate ABS survey of household spending this week showed Australians are shelling out more money on holidays, health insurance and school fees - none of which are reflected in the retail sales numbers.
- There was slightly better news on Australia’s trade surplus which widened to AUD 989 million in August, topping market forecasts of AUD 875 million. Yet the weakness in retail was mirrored in the numbers with imports of consumer goods dropping 4% in the month.
Technical analysis: The AUD/USD is testing 38.2% fibo of May-September rise again. A break below that level could open the way to 50% fibo of the above-mentioned move. In our opinion the likelihood of further fall below 0.7720 is low, and we are looking to buy this pair near that level.
Short-term signal: Buy at 0.7730, target 0.8120, stop-loss 0.7550
Long-term outlook: Bullish
Source: GrowthAces.com - your support in forex trading