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The forex traders are still peering into the darkness searching for the dim light at the end of the tunnel, but currently to no avail. Major indicator readings have been starkly depicted the gloomy economic outlook. But there are shades of hope, but unfortunately not in the short term. So the fundamental forex indicators have read as follows: Services PSI (Performance of Service Index) edges closer to tip into the expansionary phase of a reading above 50 points but fell short at 49.3 residing in the contraction zone. Respondents reiterated a lack of confidence and particularly dullness of the domestic demand weighing on business activity. Australian Performance of Construction Index (PCI) went into contraction zone by declining 2.6 points and reaching 48.2. There was mixed performance across industry sectors, with falls in employment and deliveries albeit an expanding industrial activity. Tight credit conditions and lack of public sector tenders, were attributable reasons for decline. However, ABS building approvals showed that the number of dwellings approved rose by 1.5% and consistently rising for the preceding 24 months. Also the value of approved buildings, both residential and non-residential, rose. Fundamental currency analysis of the Aussie The forex traders are still peering into the darkness searching for the dim light at the end of the tunnel, but currently to no avail. Major indicator readings have been starkly depicted the gloomy economic outlook. But there are shades of hope, but unfortunately not in the short term. So the fundamental forex indicators have read as follows: Services PSI (Performance of Service Index) edges closer to tip into the expansionary phase of a reading above 50 points but fell short at 49.3 residing in the contraction zone. Respondents reiterated a lack of confidence and particularly dullness of the domestic demand weighing on business activity. Australian Performance of Construction Index (PCI) went into contraction zone by declining 2.6 points and reaching 48.2. There was mixed performance across industry sectors, with falls in employment and deliveries albeit an expanding industrial activity. Tight credit conditions and lack of public sector tenders, were attributable reasons for decline. However, ABS building approvals showed that the number of dwellings approved rose by 1.5% and consistently rising for the preceding 24 months. Also the value of approved buildings, both residential and non-residential, rose. Quite contrastingly National Australian Bank (NAB) has shown business confidence holding onto gains made in December. However, their overoptimistic notion of a cut in interest rate of RBA by 75 basis points has been met with a snub given that interest has been rolled over at 2.5%. Business confidence has improved 1 point to reach 3, after reaching very poor levels in November, and even though business conditions have improved from a -5 to -2, they still remain in a negative zone, showing a below trend growth. Capacity utilization has fallen, and is now lowest since 2001, and the consumer demand is near record low. Labor costs have softened, in line with sharp deterioration in employment conditions, and final product prices are flat. These prices may come under pressure, due to a very soft downstream demand pattern. Still quite surprisingly 1st quarter demand forecast is a growth of 2.75%, which seems a bit farfetched given the above economic fundamental indexes. On a slightly more positive note, still exasperating the notion of uncertainty, trade balance ran a surplus of $184 million in December, 2013, which was a turnaround of $250 million deficit in December. After a review of the above economic indicators, fundamental forex forecast for Australian Dollar, Aussie, remains bearish in the medium term.
