The AUD has started the week strongly, surging more than 1% against its US counterpart on the back of some strong domestic data on Monday and an improvement in broader global risk sentiment. The story was largely retail sales driven however the commodity linked currency also found support on the back of rising copper and gold prices. The AUD/USD rallied to intraday highs of 0.7668 before consolidating around the 0.7645 handle as the USD seemed to trim losses. The AUD/NZD pair also preserved the day’s earlier gains, ranging sideways between 1.0860 and 1.0890
Taking a closer look at yesterday’s impressive retail sales numbers, the seasonally adjusted 0.4% read comfortably surpassed market expectations which were pricing an increase of just 0.3%. The bulk of the increases appear to be linked to abnormally warm weather in the month of April, with spending in restaurants, cafes and fast food outlets outweighing sharp declines in apparel and department store sales. Although many economists are still bearish on whether the recovery can be sustained when underlying conditions such as low wage growth continue to stretch household budgets, the strong rebound is a supportive indicator leading into tomorrow’s GDP release.
Attentions now turn to today’s RBA statement with Australia’s central bank expected to maintain it’s monetary policy stance, keeping rates on hold at 1.5%. Whilst this continuation will be of no surprise to markets, traders will be looking for any hawkish surprises in tone that could provide the local currency with further upside . From a technical perspective, resistance is seen near daily highs of 0.7668 followed by the psychological 0.7700 handle with downside risks appearing to be well supported at levels nearer to 0.7605.