Aussie Falls on Mixed Economic Results

The Aussie fell against major currencies on Wednesday as the Australian economy produced mixed results. At around 5:37 am GMT, the U.S. dollar added 0.39% to its value to trade around 0.9312. The embattled European currency is closely following the greenback's gains, climbing 0.38% to stand around 1.3226. On Wednesday, Australia's economy posted mixed results. In July, Australia's AIG services index rose to 48.8 from 48.5 in June. Even though the June reading shows improvement, it still indicates Australia's service sector is contracting (readings below 50 indicate contraction, while those above 50 indicate expansion). The service sector index has been in the negative territory for 10 out of last 12 months. Retail sales followed a similar pattern. In June, retail sales declined 0.1% compared to the previous month. The June figure is far better than -0.6 recorded in May, but also some way below analysts' expectations of a 0.3% increase. The service sector and retail sales results suggest the Australian central bank was right to leave its interest rates on hold during its meeting on Tuesday as the country's economic recovery remains fragile. Australia's trade balance surplus remains strong, however. According to the Australian Bureau of Statistics, trade surplus stood at A$2.05 billion in June, slightly below A$2.2 billion expected by most analysts. In May, the figure was revised to A$2.7 billion. The slight deterioration in trade balance data was a result of flat exports, while imports rose 0.3%. In the June quarter, Australia exported A$6.4 billion worth of goods more than it imported, much above A$3 billion in the March quarter. Australia's economy is still recovering from the aftermath of the devastating Queensland floods. The latest results prove the Australian central bank right; the economic recovery is still on shaky ground. Presently, most of the steam to the country's recovery seems to come from its exports sector. As Australia is a major exporter of commodities, its performance depends on the movement of the commodity prices. In Wednesday's early trading, gold is setting new records. Presently, the yellow metal stands around $1,663.05 or 0.31% above its previous close. Silver is also on the rise, climbing 0.24% to trade around $40.84. The price of crude oil is slightly higher as well, trading around $93.88, or 0.15% above its previous close. However, copper made more substantial gains, rising 0.33% to stand around $4.396. Other Asian-Pacific currencies are also retreating in Wednesday's early trading as the greenback appreciated 0.59% against the Kiwi and 0.1% against the Japanese yen. At the same time, the euro added 0.57% to its value against the Kiwi to stand around 1.6489. The European currency is also one step closer to reaching the ¥110 mark against the Japanese currency. Presently, the euro trades around ¥109.695, or 0.1% above its previous close. ACTION ITEMS:

Bullish:
Traders who believe that Australia's exporters, supported by higher commodity prices, will help the Australian economy reach full recovery might want to consider the following trades:

• Dow Jones-AIG Commodity Index Total Return ETN DJP is a long play on commodities. DJP may rise if the prices of commodities increase.

• CurrencyShares Australian Dollar Trust ETF FXA is a long play on the Aussie. FXA may rise if the Aussie appreciates.

Bearish:
Traders who believe that the Aussie is already overvalued, which should start to hurt the country's exporters and its economic recovery, may consider an alternate positions:

• PowerShares DB Commodity Short ETN DDP is a short play on commodities. DDP may rise if the prices of commodities decline.

• ETFS Short Australian Dollar Long US Dollar ETC ETF (SAD) is a short play on the Aussie. SAD may rise if the Aussie depreciates.

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