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The Australian dollar is riding higher on good data at home and in China. The impressive recovery is now moving through resistance. Will this break be confirmed?

AUD/USD is trying to break above 1.0720, a line that is struggling with in recent days. The third attempt might succeed, as the pair drifts higher.

Australian retail sales rose by 0.5% in July, higher than 0.3% that was predicted. At the same time, private capital expenditure was released. A rise of 4.9% was recorded in Q2, higher than 4.1% that was predicted. The more important part was that this rise in investment came on top of a much stronger first quarter: the rise was revised from 3.4% to 7.7%.

These fresh figures show that Australia is still resilient, despite the weakness in the housing sector. Earlier in the week, Australian building approvals disappointed with a rise of only 1%. 2.1% was expected.

Australia’s main trade partner is also on the rise: China reported that its Manufacturing PMI is still positive, above 50 points (50.9). Chinese demand is necessary for Australia.

On a year over year basis, commodity prices continue to rise, by 25.2% in the latest publication.

If the breakout is confirmed, the next line of resistance is at 1.0775, followed by 1.0888.  Significant support is at 1.06.

For more on the Aussie, see the Australian dollar forecast.

There were speculations of a rate cut in the RBA’s September meeting. The chances are now very slim. Also a rate hike doesn’t seem to be on the cards. Like many central banks, Glenn Stevens and his colleagues are in a “wait and see” mode.

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