Forex Market: AUD/USD extends drop from four-month highs after weaker-than-expected Australia’s building approvals

The Aussie dollar extended a drop from a four-month high against its US counterpart, after data showed the number of building approvals in Australia declined in February, raising concerns over the health of the nations housing sector, which the RBA sees as crucial to re-balance the economy as a mining investment boom wanes.

AUD/USD touched a session low at 0.9223 at 01:00 GMT, after which the pair consolidated at 0.9240, losing 0.1% for the day. Support was likely to be received at March 31st low, 0.9218, while resistance was to be encountered at April 1st high, 0.9302, also the pairs highest since November 21.

Aussiess demand was pressured after a report by the Australian Bureau of Statistics revealed a seasonally adjusted 5% drop to 16 669 building approvals in February, compared to expectations for a 2.5% decline and after a 6.8% increase in the previous month. On year-over-year basis, building permits rose 23.2% in February, sharply below the 34.6% gain in the previous month and compared to analysts projections of a 27.9% increase.

Yesterday, the RBA officials maintained the main interest rate at a record-low 2.5%, where it has been since August last year, in line with analysts’ estimates. Following the decision the Aussie advanced to the strongest level since November against the US dollar, but pared earlier gains after comments by the central bank’s Governor Stevens.

“The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months,” RBA Governor Stevens said in a statement following the decision, cited by Bloomberg. “The exchange rate remains high by historical standards.”

Aussie’s demand was heightened yesterday after government data showed the manufacturing PMI in China, the biggest trading partner of Australia, surged to 50.3 in March from 50.2 in the previous month, defying experts’ projections for a slowdown to 50.1.

Meanwhile, employment in United States’ private sector probably increased by 190 000 during March, following another job gain of 139 000 in February. The report by Automatic Data Processing Inc. (ADP) is based on data, encompassing about 400 000 out of 500 000 business entities with over 24 million employees engaged in 19 major sectors of the economy in accordance with North American Industry Classification System (NAICS). It usually comes out two days before the official employment report by the Bureau of Labor Statistics (BLS), thus, providing clues over the tendency in nation’s non-farming sector. In case employment increases more than anticipated, this would have a bullish effect on the greenback. The report is expected at 13:15 GMT.

Factory orders in the United States rose 0.8% in February, a monthly survey will probably reveal at 15:00 GMT. In January compared to December orders fell 0.7%. This indicator reflects current industrial activity in the country and also provides clues over sector development in the future. The survey is based on 89 different industrial categories, which are organized in 473 sub-groups. A larger rate of increase would be supportive for the US dollar.