Maybank FX Flash - AUD: CAPEX - Economic Rebalancing Still Slow- 25 Feb 2016

AUD: CAPEX – Economic Rebalancing Still Slow

§  The seasonally adjusted estimate for total new capital expenditure rose 0.8%q/q in last quarter. The rise was primarily due to the increased CAPEX in Other Selected Industries which offset the decline in the Manufacturing and Mining sectors.

§  Details suggest that Australia’s transition from an economy that is dependent on Mining investment to one that is more diversified is still gradual. However, it would take a significant deterioration in business spending expectations for RBA to ease further on 1 Mar. With credit growth is still picking pace, we see little reason for RBA to squander precious ammunition that is unlikely to be the antidote that non-mining sectors need.

§  AUDUSD was last seen around 0.7170, slipping a tad after the release.  Bears need to clear the 0.71-figure for greater extension towards the 0.6960 (23.6% Fibonacci retracement of the Dec-Jan sell off) ahead of the next key support at 0.6830. Otherwise, uptrend is still intact. The 0.7254-resistance (76.4% fib retracement of the Dec-Jan sell off) is the next barrier to break, ahead of the 0.7380 (2015 double top). We continue to hold our view that a lack of rate cut threats could continue to keep the AUD supported on dips in a world of easy monetary policy.