We won’t be seeing a lot of top-tier reports from Australia this week, so it’s likely that we’ll see risk sentiment dictate the Aussie’s price action again.
Quarterly private capex (May 31, 1:30 am GMT)
A 0.2% decline in capital expenditure in Q4 2017 spooked Aussie bulls back in March. The decline wasn’t too bad, but analysts had been expecting a 1.0% uptick and were disappointed nonetheless.
This week market players see a 1.1% improvement for Q1 2018. If the loss in mining investments outpaces growth in non-mining (especially construction) projects, then we might see a bit of pressure from the bears.
Overall risk sentiment
As you can see below, risk aversion early in the week gave the Aussie the advantage it needed to finish the week with gains.
Over the next couple of days traders will pay close attention to updates on the U.S.-China trade negotiations, the U.S.-North Korea peace talks (or any cancellations), U.S. Treasury yields, and even political skirmishes in the euro region.
Last Week’s Price Review
The Aussie finished in third place last week and is currently in second place this week (as of 6:00 am GMT), which marks the third straight week of net wins for the Aussie.
Gold climbed steadily higher this week, thanks to geopolitical uncertainty. And we can see that the Aussie took some directional cues from gold prices. However, we can also see that the Aussie didn’t really track gold prices that closely. And that’s likely because risk sentiment got in the way.
Anyhow, gold prices started the week on a weak footing before turning higher during the late London session. However, the Aussie showed strength from the get-go. And as noted in Monday’s London session recap, this was likely due to the risk-on vibes at the time.
Gold then traded roughly sideways on Tuesday and Wednesday. And it looks like the Aussie became vulnerable to opposing currency price action during that time since the Aussie’s price action began to diverge and became a mixed mess.
The Aussie’s bullish run on Monday did allow most Aussie pairs to trade above last week’s closing prices, though. Also, the Aussie did get lucky against the pound and the euro since the pound and the euro both got whupped hard on Wednesday. And while the Aussie initially had a tough time against the yen and the Swissy, risk sentiment did eventually improve and gold prices began to rise in the runup to and after the release of the FOMC minutes, so the Aussie’s losses against the yen got capped and the Aussie even eventually began winning out against the Swissy.
Gold prices continued to rise on Thursday. Unfortunately for the higher-yielding Aussie, risk aversion made a comeback so the Aussie wasn’t able to track the rise in gold prices too closely.