AUD/USD – Rangebound Trading Continues As Aussie Trades Below 0.90 Line

AUD/USD continues to trade in a narrow range, continuing the trend which started on Wednesday. The pair is trading in the mid-89 range as the Australian dollar continues to struggle. In economic news, Australian Private Capital Expenditure posted sharp gains and climbed to a five-month high. In the US, Preliminary GDP beat the estimate while Unemployment Claims practically matched the forecast.

Australian data has not looked sharp lately, so the markets were especially pleased with Private Capital Expenditure, which jumped 4.0%, after posting two consecutive declines. The strong gain crushed the estimate of 0.5% and was the business indicator’s best performance since May. The news was not as good from HIA Home Sales, which posted a sharp decline of 3.7%. In the US, Preliminary GDP rose 2.5% in Q2, surpassing the estimate of 2.2%. Unemployment Claims dropped slightly to 331 thousand, just missing the estimate of 330 thousand.

The markets are nervous as investors brace for a likely military strike by the US against Syria. The US has vowed to respond after a chemical attack in the war-torn country, apparently by the Syrian regime, killed hundreds of civilians. There are fears that a US attack could elicit a response from Syria or even Iran, so traders should expect to see volatility in the markets. There has been a report that the US may choose to strike on the weekend, which would give the markets time to adjust before opening on Monday. The uncertainty has boosted the US dollar against the major currencies, although the Aussie has not lost ground in Thursday trading.

On Wednesday, there was another poor release out of the US, as Pending Home Sales looked weak. The key housing indicator posted its second straight decline, dropping 1.3% in August. This was well off the market estimate of 0.2%. US manufacturing indicators started off the week with sharp declines, although consumer confidence looked sharp. The dollar has remained strong despite the mixed data, thanks to the crisis over Syria as well as market speculation over QE tapering.

The Federal Reserve has not given many clues about when it might taper QE, but the recent Jackson Hole summit provided a glimpse of the divisions in the Fed as to when it might act. Fed chair Bernard Bernanke was a no-show at the summit, giving other policymakers an opportunity to express their views on QE. Dennis Lockhart, head of the Atlanta Fed, said that tapering could start in September, but only if US data justified such a move. There was a more hawkish statement from James Bullard, head of the St. Louis Fed. Bullard said that there was no need for the Fed to rush into QE tapering. Bullard will make two appearances on Thursday, so we could see some reaction from the markets to his remarks. Meanwhile, the uncertainty over QE tapering has boosted the US dollar, raised the yields on US treasury bonds and led nervous investors to pull billions of dollars out of emerging markets. With September just around the corner, we could see strong volatility in the markets as speculation over QE heats up.

AUD/USD for Thursday, August 29, 2013

AUD/USD August 29 at 14:20 GMT

AUD/USD 0.8931 H: 0.8979 L: 0.8917

AUD/USD Technical

• AUD/USD is showing very little activity in Thursday trading as it remains in the low-89 range.
• AUD/USD continues to face resistance at the 0.90 line. This is followed by a resistance line at 0.9089.
• On the downside, the pair is testing support at 0.8926. This line could fall if the Aussie resumes its downward trend. This is followed by strong support at 0.8848. This line has remained intact since January.
• Current range: 0.8926 to 0.9000

Further levels in both directions:

• Below: 0.8926, 0.8848, 0.8747 and 0.8578
• Above: 0.9000, 0.9089, 0.9135, 0.9221 and 0.9328

OANDA’s Open Positions Ratio

AUD/USD ratio is unchanged in Thursday trading. This is reflected in the pair’s movement, as the pair is showing very little movement. The makeup of the ratio shows a solid majority of long positions, indicating that trader sentiment is strongly biased towards the Australian dollar posting gains against the US currency.

The Aussie remains under pressure and remains below the critical 0.90 line. We could see AUD/USD continue to trade close to the 0.90 level in the North American session.

AUD/USD Fundamentals

• 1:00 Australian HIA New Home Sales. Actual -4.7%.
• 1:30 Australian Private Capital Expenditure. Estimate 0.5%. Actual 4.0%.
• 12:30 US Preliminary GDP. Estimate 2.2%. Actual 2.5% 
• 12:30 US Unemployment Claims. Estimate 330K. Actual 331K.
• 12:30 US Preliminary GDP Price Index. Estimate 0.7%. Actual 0.8%.
• 12:50 US FOMC Member James Bullard Speaks.
• 14:30 US Natural Gas Storage. Estimate 65B. Actual 67B.
• 23:45 US FOMC Member James Bullard Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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