AUD/USD – Little Movement as Rangebound Trading Continues

AUD/USD continues to have an uneventful week, in sharp contrast to the previous week, when the US dollar surged against the Australian currency. The pair is trading quietly in the mid-0.97 range in Wednesday’s European session. It’s a quiet day on the fundamental front, with a handful of US releases, highlighted by Final GDP. There are no Australian releases on Wednesday.

The US enjoyed a banner day on Tuesday, as US releases looked excellent. Core Durable Goods, CB Consumer Confidence and New Home Sales, all key releases, beat their estimates. Manufacturing data, often a sore spot, also looked good as the Richmond Manufacturing Index had its best performance since last November. The strong numbers are particularly encouraging as they come from a wide range of economic sectors. If Thursday’s US employment numbers follow suit and beat the estimate, we could see the US dollar flex some muscle.

Is the US Federal Reserve backtracking on QE? The US dollar surged last week after Federal Reserve Chair Bernard Bernanke said that the Fed was planning to scale down QE. However, US (and global) stock markets fell sharply on the news, and the Fed finds itself trying to contain the damage and calm the nervous markets. Dallas Fed President Richard Fisher declared that “tapering” should not be confused with “tightening” and said that the Fed was not exiting from its accommodative policy action just yet. Minneapolis Fed President Naraya Kocherlakota reiterated that the Fed was continuing with an expansionary monetary policy event if QE was terminated, and said that it was a misperception to assume that the Federal Reserve had turned more hawkish. One can be excused for dismissing these statements as little more than linguistic acrobatics, and it is questionable if the markets will be reassured by these statements from the Fed, which are clearly aimed at damage control and reassuring nervous investors.

With national elections in Australia only a few months away, Prime Minister Julia Gillard faces a steep uphill battle to win re-election. The economy continues to sputter, and Gillard could pay the price of a disgruntled electorate .According to a recent poll, Gillard’s Labor Party could take a beating in the September vote and lose more than half of its 71 seats in parliament. As well, there is speculation that Kevin Rudd may challenge Prime Minister Julia Gillard for leadership of the Labor Party. The markets are sure to keep a close eye on the upcoming election, as political uncertainty could weigh on the Australian dollar.

AUD/USD for Wednesday, June 26, 2013

AUD/USD June 26 at 12:15 GMT

AUD/USD 0.9283 H: 0.9314 L: 0.9236

AUD/USD Technical

The Australian dollar continues to trade in the mid-0.92 range, as the proximate support and resistance levels remain intact (S1 and R1 above). On the upside, the pair continues to face resistance at 0.9328. This is followed by stronger resistance at 0.9405. On the downside, the pair is receiving support at 0.9221. This is not a strong line, and could see pressure if the Aussie loses more ground. There is stronger support at 0.9135. This line has remained intact since September 2010.

• Current range: 0.9221 to 0.9328

Further levels in both directions:

• Below: 0.9221, 0.9135, 0.9071, 0.9000, 0.8916 and 0.8747
• Above: 0.9328, 0.9405, 0.9541 and 0.9651

OANDA’s Open Positions Ratio

AUD/USD ratio remains unchanged, continuing the trend we saw in the Tuesday session. This is consistent with what we are currently seeing from AUD/USD, as the pair trades in a narrow range. The ratio continues to be dominated by long positions, indicative of a strong bias towards the Aussie moving higher. Traders should keep an eye on the ratio, as an increase in movement could be an early sign of the pair breaking out from its current inactivity.

AUD/USD is trading quietly, and shrugged off strong US data on Tuesday. We could see the pair continue to drift during the day, but this may change on Thursday, as the US releases key employment numbers.

AUD/USD Fundamentals

• 12:30 US Final GDP. Estimate 2.4%.
• 12:30 US Final GDP Price Index. Estimate 1.1%.
• 14:30 US Crude Oil Inventories. Estimate -1.9M.

*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.