AUD/ USD – Testing 1.03 Level as Australian Data Disappoints

AUD/USD is showing some movement in Wednesday trading, as the pair trades slightly above the 1.03 line. Australian Home Loans was a big disappointment, as the housing indicator declined by 1.5% for the second straight month. The markets had expected a modest gain of 0.2%. Westpac Consumer Sentiment gained 2.2%, but this was well below the previous reading, which saw a jump of 7.7%. The indicator has been erratic, making it difficult to accurately assess the mood of the Australian consumer. The markets will be keeping a close watch as Australia releases Employment Change and the Unemployment Rate on Thursday. In the US, today’s highlight is Core Retail Sales and Retail Sales. There has been much talk about the US recovery taking a step forward, and these two key indicators will be an important test as to the health of the US economy.

Taking a look at Japan, the markets continue to expect the Bank of Japan to implement further monetary easing measures. These sentiments were reinforced following tough comments from the incoming BOJ head. During confirmation hearings, Haruhiko Kuroda declared that he would do “whatever it takes” to beat deflation and reach the government’s inflation target of 2.0%. The incoming governor reiterated that he is confident that an effective monetary policy could defeat deflation, which continues to weigh heavily on the Japanese economy. Kuroda noted that the current amount of asset buying by the BOJ will not achieve the 2.0% inflation goal. There are media reports that Kuroda may start implementing additional easing immediately upon assuming office next week, rather than wait until the BOJ’s next policy meeting in April. There were no surprises as the BOJ released the minutes of its February meeting, at which the central bank maintained its monetary policy. Some members stated they were in favor of buying Japanese Government Bonds with longer remaining maturities if additional monetary easing is needed in the future.

In the US, excellent employment numbers last week have fuelled expectations that the recovery is finally moving ahead. Employment Change shot higher, and the Unemployment Rate dropped to 7.7%, its lowest level since 2008. The markets will be hoping that Unemployment Claims continues its string of strong releases on Thursday. The recent solid numbers out of the US  has led to speculation that the Fed might end the current round of QE, which involves the purchase of $85 billion in assets each month, earlier than expected. In one possible scenario, the Fed would let mature the trillions of dollars in securities they have purchased, rather than saturate the market with a huge amount of securities. The US economy has been bumpy, and has not responded all that well to the Fed’s massive purchase of assets. This “new exit” strategy could take place as early as June, and would be a dramatic shift in the Federal Reserve’s current monetary policy.  

AUD/USD for Wednesday, March, 13 2013

AUD/USD March 13 at 12:30 GMT

1.0309  H: 1.0334  L: 1.0298

AUD/USD Technical

AUD/USD is trading just above the 1.03 line. The pair has been unable to break out in either direction, as the proximate support and resistance levels remain intact (S1 and R1 above). On the upside, 1.0334 is providing resistance. This weak line could see further activity. There is stronger resistance at 1.0424. The pair is receiving firm support at 1.0230. This is followed by the support level of 1.0174.

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 and 1.0605

OANDA’s Open Position Ratios

The AUD/USD ratio is back in action on Wednesday, pointing to movement towards short positions.  This is consistent with the movement we are seeing in the pair, as the Australian dollar has edged lower in the European session. The ratio is dominated by open long positions, indicating a strong bias towards the Aussie pushing higher against the US dollar.

AUD/USD is trading just above the 1.03 line, and is up close to one cent since the start of the week. We could see some volatility following the release of US retail sale numbers, which mark the first key releases out of the US this week. Any unexpected readings could affect the direction of AUD/USD.

AUD/USD Fundamentals

• 00:30 Australian Home Loans. Estimate 0.2%. Actual -1.5%.
• 12:30 US Core Retail Sales. Estimate 0.5%
• 12:30 US Retail Sales. Estimate 0.5%
• 12:30 US Import Prices. Estimate 0.5%
• 14:00 US Business Inventories. Estimate 0.5%
• 14:30 US Crude Oil Inventories. Estimate 2.3M
• 17:00 US 10-year Bond Auction
• 18:00 US Federal Budget Balance. Estimate -200.0B

*Key releases are highlighted in bold

*All release times are GMT

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