AUD/USD – Australian Dollar Lower After Disappointing Retail Sales Data

AUD/USD was lower in Wednesday’s European session. The Australian dollar lost ground following disappointing Australian Retail Sales. The Aussie dipped below the 1.03 level before recovering, and remains under pressure. As expected, the Reserve Bank of Australia did not change its benchmark interest rate, which remained at the current level of 3.0%.

The Australian dollar has not looked sharp lately, and fell to its lowest levels in almost three months, after weak Retail Sales data out of Australia. The key consumer indicator declined by 0.2%, well below the estimate of a 0.3% gain. It was the indicator’s weakest showing since September 2012, and points to ongoing weakness in the Australian economy. The RBA left current interest rate levels untouched, maintaining the 3.0% level. The central bank has caught the markets off guard more than once with a cut to rates, but there was no surprise this time around. Although the RBA did not lower rates, the central bank stated that there was more room to cut rates due to weak inflation in the economy. The RBA noted that inflation was in line with the target, but growth was slightly below expectations. Analysts are predicting that the RBA, which kept rates at their current level of 3.0%, could step in with another rate cut as early as its next meeting. Looking at Wednesday’s releases, the lone Australian indicator is AIG Construction Index. This index has been showing slight improvement in recent readings, but continues to be stuck deep in negative territory, indicating continuing contraction in the construction sector. The markets will be eagerly awaiting Thursday’s key employment data. In the US, the only release is Crude Oil Inventories.

Taking a look at the US, recent economic indicators continue to keep the markets guessing about the extent of the US recovery. Recent key releases continue to paint a mixed picture. GDP was a major disappointment, as the economy contracted for the first time since 2009. Employment numbers lost their recent shine, as NFP and Unemployment Claims failed to meet expectations, and the unemployment rate inched up to 7.9%. On the bright side, last week’s consumer sentiment and manufacturing PMI data was very strong. In Wednesday’s releases, ISM Non-Manufacturing PMI, a key indicator, declined slightly, but still matched the estimate. With only a handful of key US releases this week, each one will find itself under the market microscope as the markets try to get a handle on where the US economy is headed.

AUD/USD for Wednesday, February 6, 2013

AUD/USD February 6 at 12:35 GMT

1.0315 H: 1.04 L: 1.0297

AUD/USD Technical

AUD/USD continues to lose ground, and dipped below the 1.03 line earlier. The pair is receiving support at 1.0268. This line could face pressure if the Aussie continues to stumble. The next support level is at 1.0174 ,which has not been tested since last October. On the downside there is weak resistance at 1.0334. This is followed by a stronger line at 1.0424. 

Current range: 1.0268 to 1.0334

Further levels in both directions:

• Below: 1.0268, 1.0174, 1.0031 and 0.9947.
• Above: 1.0334, 1.0376, 1.0424, 1.0473, 1.0530, 1.0605 and 1.0718

OANDA’s Open Position Ratios

The AUD/USD ratio continues to show strong movement towards long positions. This is not reflected in the current move by the currency pair, as the Australian dollar continues to take a tumble. The movement in the ratio and the fact that most open positions are long, underscores strong trader expectation that we will see a correction to the present downward movement by AUD/USD.

AUD/USD lost ground following a dovish rate statement from the RBA, and the slide is continuing after weak retail sales numbers. We are seeing significant downward momentum, and the pair could break below the 1.03 line and continue its downward slide. 

AUD/USD Fundamentals

• 00:30 Australian Retail Sales. Estimate 0.3%. Actual -0.2%.
• 15:30 US Crude Oil Inventories. Estimate 2.7M.
• 22:30 Australian AIG Construction Index.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.