AUD/USD – Steady After Recent Losses

AUD/USD is steady in Thursday trading, following steep losses by the pair the previous day. The pair was trading in the mid-1.02 range.  The markets are waiting for a host of US data on Thursday, including four key releases –  Core CPI, Unemployment Claims, Existing Home Sales and the Philly Fed Manufacturing Index. In Australia, RBA Governor Glenn Stevens will address a House of Representatives committee.

Late Wednesday, the Federal Reserve released the minutes of its most recent FOMC meeting. At the meeting, there was discussion of winding down the current round of QE due to concern about the negative effect that QE could have on the financial markets. Previously, the Fed had stated that it expected to continue with QE until unemployment dropped to 6.5%. The Fed has been purchasing a record amount of assets since December, kept its key interest rate close to zero and expanded its balance sheet to over $3 trillion, but the US economy has not responded as quickly as hoped. The markets were surprised by the change in the Fed’s stance, and the euro dropped against the US dollar.

Finance ministers and central bank governors from the world’s leading economies huddled together at the recent G-20 meeting, and the final statement made reference to the recent volatility in exchange rates. The leaders pledged not to “target our exchange rates for competitive purposes”, and to move more rapidly to market-determined exchange rate systems. The G-20 statement did not make reference to Japan, which has come under fire for monetary policies which have led to free-fall in the value of the Japanese yen. G-20 leaders appear resigned to the yen continuing to slide, but do not want Japanese officials to make public statements which will pull down the currency. Thus, Japan’s major trading partners, although very concerned about the tumbling yen, have tacitly given Japan a green light to continue to stimulate its economy with further monetary easing measures and higher inflation, which will likely have a negative impact on the yen.

Australian Treasurer Wayne Swan, who attended the G-20 meeting, dismissed talk of a “currency war”, but conceded that the strong Australian dollar has had a negative effect on the economy, including exports, mining and tourism. The Australian dollar has lost ground in 2013, but has still gained about 6 percent against the greenback since mid-2012. Swan stated that he had no problem with Japanese stimulus packages, echoing the view of the G-20 that he strongly supported market-determined exchange rates. However, Japan is a major trading partner of Australia, and a weakening yen is not good news for Australia’s hard-hit export sector. 

AUD/USD for Thursday, February 21, 2013

AUD/USD February 21 at 14:00 GMT

1.0251 H: 1.0265 L: 1.0226

AUD/USD Technical

AUD/USD has remains steady after the Australian dollar took a tumble on Wednesday. The pair is receiving weak support at 1.0230. This line was briefly breached earlier, and could face further activity. The line of 1.0174, which has held firm since October 2012, is the next support level. On the upside, there is resistance at 1.0334. This is followed by a strong line at 1.0424.

Current range: 1.0230 to 1.0334.

Further levels in both directions:

• Below: 1.0230, 1.0174, 1.0080, 1.00 and 0.9948.
• Above: 1.0334, 1.0424, 1.0568, 1.0605, 1.0718 and 1.0874.

OANDA’s Open Position Ratios

The AUD/USD ratio is pointing to strong activity towards long positions, which now enjoy a very strong majority of open positions. This movement is not reflected in the currency pair, as the Aussie is struggling to level off after shedding about a cent on Wednesday. Trader sentiment is strongly biased towards the Australian dollar recovering against the greenback.

AUD/USD is struggling, as it trades in the mid-1.02 range. With a host of key US data due later today, any unexpected readings could cause further volatility in the pair.

AUD/USD Fundamentals

• 13:30 US Core CPI. Estimate 0.2%.
• 13:30 US Unemployment Claims. Estimate 353K.
• 13:30 US CPI. Estimate 0.1%.
• 14:00 US Flash Manufacturing PMI. Estimate 55.6 points.
• 15:00 US Existing Home Sales. Estimate 4.89M.
• 15:00 US Philly Fed Manufacturing Index. Estimate 1.1 points.
• 15:00 US Mortgage Delinquencies.
• 15:00 US CB Leading Index. Estimate 0.2%.
• 15:30 US Natural Gas Storage. Estimate -119B.
• 16:00 US Crude Oil Inventories. Estimate 1.9M.
• 17:30 US FOMC James Bullard Speaks.
• 22:30 Reserve Bank of Australia Governor Glenn Stevens Speaks.

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.