The Aussie gained ground against the greenback yesterday following the release of overwhelmingly positive current account surplus data for the December 2023 quarter. The Australian dollar’s decline was also fueled by extremely weak US factory order data for January. Overall, the AUD/USD pair rallied from a low of 0.6476 to a high of 0.6520 in the past 24 hours.
According to the data published by the Australian Bureau of Statistics (ABS), the country’s current account surplus surged to A$11.80 billion in the December 2023 quarter, following a surplus of A$1.30 billion in the previous quarter and more than double the forecasts of A$4.90 billion.
The rise in the current account surplus was an outcome of an increase in the trade surplus and a decrease in the net primary income deficit.
Goods exports grew by 3.10% (or A$4.17 billion) to A$138.68 billion in 4Q 2023. While volumes inched down 0.40% in the December 2023 quarter, prices rose by 3.50% in the same period. Goods imports declined by A$1.97 billion (or 1.80%) to A$108.47 billion. While volumes fell by 2.80%, prices increased by 1.10%.
The net primary income deficit narrowed by A$1.90 billion in the December 2023 quarter to A$20.20 billion, following an A$22.10 billion deficit in the September 2023 quarter. Similarly, the net secondary income deficit decreased by A$432 million to A$391 million.
The capital and financial account balance turned into a deficit of A$9.73 billion in the December 2023 quarter, following a surplus of A$13.21 billion in the September 2023 quarter. The financial account posted a deficit, primarily due to an A$13.30 billion net outflow of equity and an A$3.70 billion net inflow of debt.
The net international investment liability position stood at $836.64 billion at the end of December 31, 2023, up A$25.50 billion from A$811.20 billion in the September 2023 quarter.
In the US, the Institute for Supply Management has stated that services PMI (purchasing managers’ index) inched down to 52.60 in February from 53.40 in March and missed forecasts of 53.
The index reflecting supplier deliveries fell to 48.90 in February from 52.40 in January. A reading below 50 indicates contraction, and vice versa. Likewise, the employment index decreased to 48 from 50.50. The inventory index inched down to 47.10 from 49.10. Also, the backlog of orders index eased to 50.30 from 51.40.
On the contrary, the business activity/production index rose to 57.20 from 55.80. The fresh orders index improved to 56.10 from 55. Both indices are more than one point higher than the six-month average.
According to the US Census Bureau, the country’s factory orders fell by 3.60% m-o-m in January, following a 0.30% decline in the previous month and worse than forecasts of a 3.10% decrease. The reported figure reflects the steepest decline since April 2020.
The decrease was led by a 16.20% m-o-m drop in transportation equipment orders. Primary metals posted a 1.90% decline. Fabricated metal product orders inched down 0.90% m-o-m in January. Machinery orders fell by 0.30%. On the contrary, orders for computers and electronic goods grew by 1.30% in the same period. Excluding transportation, factory orders decreased by 0.80%.
The historical price chart indicates that the AUD/USD pair has bounced off the support at 0.6480. The next resistance is anticipated to be only near 0.6605. Additionally, the stochastic indicator is out of the bearish zone. Therefore, we anticipate the AUD/USD pair to remain in an uptrend in the short term. However, it will be prudent to open positions after the currency pair closes above its 50-day moving average.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
