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Australian Private Capital Expenditure, released each quarter, is an important leading indicator which  can have  a significant impact on the markets. A reading which is higher than the market forecast is bullish for the Australian dollar.

Here are the details and 5 possible outcomes for AUD/USD.

Published on Thursday at 1:30 GMT.

Indicator Background

Private Capital Expenditure is an important gauge of the level of spending by the private business sector. An unexpected reading can quickly impact on the movement of AUD/USD.

The indicator has struggled recently, posting two straight declines. The Q1 reading was dismal, with a sharp decline of 4.4%.   This was much weaker than the forecast of a -2.3%. Another drop is expected in the Q2 report, with the estimate standing at -2.5%.

Sentiment and Levels

The Chinese slowdown  continues to  having global repercussions, and the Australian economy,  which is heavily  dependent on the Asian giant, is  first in the firing line if the  China continues to  post additional  weak numbers. As well, the RBA convenes on September 1st to make its monthly rate decision, and a cut in rates would likely hurt the Australian dollar. So, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels from top to bottom: 0.7438, 0.7346, 0.7266, 0.7113, 0.7011 and 0.6931.

5 Scenarios

  1. Within expectations: -3.0% to -2.0%: In this scenario, AUD/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
  2. Above expectations:  -1.9% to -1.4%: A  smaller decline than expected  could push the pair above one resistance level.
  3. Well above expectations: Above -1.4%:  In  this scenario, AUD/USD could push higher, and two or more resistance lines can be broken.
  4. Below expectations: -3.6% to -3.1%: A lower than expected reading could pull the pair downwards, with one support level at risk.
  5. Well below expectations: Below -3.6%: A very poor reading  could hurt  confidence in the Australian dollar  and AUD/USD could break two or more support levels.

For more on the Aussie, see the AUD/USD forecast.

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