Australian dollar steady on soft trade data amid RBA fallout. Where to for AUD/USD?

The Australian dollar remained steady after trade data disappointed on expectations, coming in at AUD 7.46 billion for the month of February, instead of AUD 11.65 billion anticipated.

The miss in estimates was due to a 12% surge in imports, while exports were at the same level as January. The export side of the ledger hit forecasts, but imports were expected to rise by only 2%.

Today’s data could add further fuel to the rate hike fire for the RBA, as it points toward a robust domestic economy with large increases in spending by consumers.

Overnight, the Aussie pulled back from its highest level since the middle of last year. The fallout from the April RBA monetary policy meeting continues and today’s data has potentially justified the RBA’s hawkish statement after the meeting on Tuesday.

The backdrop remains favourable for the Aussie, with a federal budget deficit at a comfortable percentage of GDP to its G-20 peers and although today’s export number hit the target, boosts to exports appear to be coming down the pipe.

The war in the Ukraine and the consequent sanction on Russian goods continues to elevate the price of many commodities that Australia export.

Although iron ore is Australia’s number one export, other top exports are coal, liquefied natural gas (LNG), gold, copper, aluminium, wheat etc. These are many of the commodities that Russia sells to the world, that are now facing restrictions. Russia accounts for 0.2% of Australian exports as a destination.

If the situation in Ukraine continues, the trade data might be supportive of the Australian dollar in the coming quarters.

AUD/USD technical analysis

AUD/USD tried to break above an ascending trend channel but has moved back within it, but the trend channel remains intact for now.

This move lower has seen the price move below the 10-day simple moving average (SMA) which could signal a pause in bullish momentum in the short-term.

Underlying the price is all other medium and long-term SMAs represented here by the 21-, 55-, 100- and 260-day SMAs. While most have a positive gradient, the 260-day SMA is yet to turn positive.

Something to keep on the radar is the price crossing back above the 10-day SMA, combined with the 260-day slope turning up. This has the potential to signal a resumption of bullish momentum.

If this were to occur, it is possible that it would be happening at the same time that resistance levels are being breached. Resistance might be at the recent peak of 0.7661 or the historical resistance level at 0.7556.

On the downside, support may lie at 0.7456, 07441 and 0.7368

Follow Daniel McCarthy on Twitter at @DanMcCarthyFX

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