Australian Building Approvals Decline By 16.4% m-o-m in May

Australian Building Approvals Decline By 16.4% m-o-m in May
July 2, 2020

 

The Aussie rallied against the greenback yesterday despite the release of worse-than-anticipated building approval data by the Australian Bureau of Statistics (ABS). The release of positive but lower-than-anticipated ADP Non-Farm Employment data from the US aided the Australian dollar’s uptrend. Notably, the release of upbeat ISM Manufacturing PMI data was discarded by the market, which was more worried about the highest single-day-spike in COVID-19 infections in the US. In the past 24 hours, the AUD/USD pair has rallied from a low of 0.6875 to a high of 0.6940.

The ABS stated that building approvals declined 16.4% m-o-m in May, following a 2.1% drop in the earlier month. Economists had anticipated the building approvals to fall by 7%. Correspondingly, the value of total building approvals decreased by 13.5% in May.

Specifically, the estimate for private sector houses declined by 4.4% in the reported period. Excluding houses, the estimate for private sector dwellings dropped 34.9% in May. While the value of residential buildings decreased by 17.3%, the value of non-residential building dropped 7.1%. Building permits are the best measure of imminent construction work because getting government clearance is the first step towards the construction of a new building.

In the US session, data published by Automatic Data Processing, Inc. (ADP) indicated that non-farm employment rose by 2,369,000 jobs in June, compared with 3,065,000 job additions in the prior month and lower than the 2,850,000 jobs anticipated by economists.

Commenting on the ADP non-farm employment change data, Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said, “Small business hiring picked up in the month of June. As the economy slowly continues to recover, we are seeing a significant rebound in industries that once experienced the greatest job losses. In fact, 70 percent of the jobs added this month were in the leisure and hospitality, trade, and construction industries.”

According to the Institute for Supply Management, the manufacturing PMI (purchasing managers’ index) rose to 52.6 in June, from 43.10 in the earlier month. Economists had anticipated a reading of 49.50. A reading above 50 indicates expansion and vice-versa. It is the second successive month of expansion after April contraction that ended 131 months of successive growth. The New Orders Index increased 24.6 points m-o-m to 56.4 in June. The Production Index reading was 57.30 in June, an increase of 24.1 points from the earlier month. The Backlog of Orders index stood at 45.30 in June, up 7.1 points from the May reading of 38.2. The Employment Index also rose 10 points to 42.1 in the reported month. However, the Supplier Deliveries Index declined to 56.90, from May reading of 68.

The Institute for supply management also stated that the manufacturing price index increased to 51.3 in June, from 40.8 in the earlier month and above the reading of 43.80 anticipated by the market.

A separate report published by the US Census Bureau indicates that construction spending decreased 2.1% m-o-m in May, following a 2.9% decline in the earlier month. Economists had anticipated the construction spending to increase by 1%.

The market is worried about the second wave of COVID-19 infections across the globe. The US recorded 52,000 COVID-19 infections in the past 24 hours, reflecting the highest single-day-spike. So far, 2.78 million people have been affected in the US, and 130,000 people have lost their lives. As the market is giving more importance to COVID-19 data, the AUD/USD pair is expected to remain range-bound with a slight bullish bias.

The historical price chart indicates that the AUD/USD pair is consolidating at 0.6840. The next resistance is anticipated only near 0.7725. Additionally, the stochastic oscillator is in the bullish zone. Therefore, we are anticipating the currency pair to move up in the short-term.

AUD - technical analysis - 2nd July 2020

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.

Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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