• More Upbeat Aussie Data
• Resistance Set At 1.0583
• RBA Rate Cut In The Balance

Pushing on with its seemingly irrepressible winning streak, Australia reported a 1 percent rise in monthly retail sales figures Thursday. 

Despite a minor dip on currency charts after disappointment over the Fed.’s failure to implement any easing strategies, the AUD/USD is now back on the ascent having regained a key level at 1.0500. Speaking of the release, Peter Esho (pictured), Chief Market Analyst (Asian Markets) at City Index said: “Today’s Australian retail sales numbers are a continuation of positive news, which really commenced from the beginning of June this year. A 1% monthly rise in what many consider to still be a timid retail environment should be taken in the context of still very low unemployment, solid GDP growth and inflation at the lower end of the central bank’s target range.”

Tough Resistance On Currency Charts

But currently posting around the 1.0497 mark, many economists are now suggesting that despite being the biggest monthly gainer for the month of July, the Aussie is destined to hit tough resistance levels. A short-term, achievable target for the pair may be around the 1.0542 high that was reached yesterday on charts. But aside from that, analysts say, “we continue to favour failure between here and 1.0583, the 78.6% retracement of the move down from February”, wrote Commerzbank analyst Karen Jones.

Today’s impending announcement from President Mario Draghi may have the ability to switch the prevailing risk-on sentiment which has helped guide investors towards the Aussie. A failure to outline an actionable plan or detail any concrete steps to be taken could result in major market backlash against the euro zone and see investors hedging their trades.

Another factor thought to have aided the Aussie’s ascent has been the emergence of better-than-expected Chinese PMI data. As a commodity-linked currency, the AUD relies heavily on the strength of China as the world’s second largest economy and mass importer of steel and other metals. Data out Thursday showed that PMI rebounded to a 3-month high in China, reaching 49.3 from 48.2 the previous month.

And the positivity looks set to continue were steel production is concerned, with potential changes to tax rebates in China set to encourage even steeper production patterns.

RBA Rate Decision Looms

Once the dust has settled following the ECB’s policy announcement today, Aussie-watchers will have their eye on next week’s Reserve Bank of Australia (RBA) rate cut decision. Market murmurings are so far suggesting that, despite initial ideas about a deep slash, economists are now far feeling more reserved.

Since November, the central bank has imposed 1.25 percentage points of rate cuts. And while June house price rebounded thanks to the previous rate cut, the choice about when to act sets up a difficult balancing act for the RBA. Esho added: “Successive quick cuts to make sure the economy doesn’t fall into a downward spiral while maintaining a vigilant stance on long term inflation pressure. The mining and investment pipeline, while discretionary around timing, won’t escape Australia and so any further cuts will further compound inflationary pressure in the medium term. The RBA will be mindful of this.”

Sarah Cox, Markets Writer. ForexSpace.com