AUD/USD – Aussie Loses Ground Despite Upbeat Australian Trade Balance

After a very quiet start to the week, the Australian dollar has posted losses in Tuesday trading. AUD/USD is trading in the low-0.89 range late in the European session. In economic news, Australia’s Trade Balance improved to a five-month high, as the deficit narrowed to -0.12 billion dollars. The AIG Construction Index will  be released later on Tuesday. Over in the US, ISM Non-Manufacturing PMI dropped to 53.0 points, well short of the estimate. As expected, the Senate confirmed Janet Yellen to head the Federal Reserve, starting in February. Today’s key event is US Trade Balance.

As expected, the US Senate confirmed Susan Yellen as chair of the Federal Reserve by a wide margin on Monday. Yellen becomes the first woman to head the powerful central bank. She has been a strong supporter of outgoing chair Bernard Bernanke, who lowered interest rates and implemented a QE program in order to boost a struggling US economy. Yellen takes over the helm on February 1, and will chair her first policy meeting in March.

On Friday, outgoing Federal Reserve Chair Bernard Bernanke gave a cautious thumbs-up to the US economy, saying that we could be in for a period of faster growth. Bernanke is winding up his eight years at the helm of the Fed, which included implementing a QE program in order to deal with a severe economic and financial crisis. The Fed has started to taper QE, with a cut of $10 billion to the $85 billion in assets which the Fed has been purchasing each month. The Fed will meet at the end of January, and another taper of $10 billion is a strong possibility. Meanwhile, Bernanke reiterated that the QE taper did not mean that interest rates would be increased.

We’ll get a look at some key employment numbers this week, including Unemployment Claims, Non-Farm Payrolls and the Unemployment Rate. Last week’s Unemployment Claims were almost identical to the previous week, coming in at 339 thousand. This was slightly above the estimate of 334 thousand.  The Non-Farm Payrolls release could impact on the next Fed decision, after 2013 ended with QE tapering. While it was small, the Fed did indeed change policy, and this could have a significant positive impact on the US dollar. Meanwhile, ISM Non-Manufacturing PMI disappointed with a reading of 53.0 points, well off the estimate of 54.6 points.

AUD/USD for Tuesday, January 7, 2013

AUD/USD January 7 at 14:35 GMT

AUD/USD 0.8915 H: 0.8968 L: 0.8911

AUD/USD Technical

• AUD/USD has posted losses in Tuesday trading.
• On the upside, the next resistance line is at the round number of 0.9000. This is followed by resistance at 0.9119.
• On the downside, 0.8893 continues to provide support. This weak line is under pressure as the Aussie continues to lose ground. The next support level is 0.8735, which has held firm since July 2010.
• Current range: 0.8893 to 0.9000

Further levels in both directions:

• Below: 0.8893, 0.8735, 0.8658, 0.8505 and 0.8411
• Above: 0.9000, 0.9119, 0.9229 and 0.9305

OANDA’s Open Positions Ratio

AUD/USD is pointing to gains in long positions in Tuesday trading. This is consistent with what we are seeing from the pair, as the US dollar has posted gains. AUD/USD is made up of a substantial majority of long positions, reflecting a trader bias towards the Australian dollar reversing directions and moving higher against the US currency.

The pair is struggling to stay above the 0.89 line in Tuesday trading. We could see some movement during the North American session as the US releases Trade Balance later in the day.

AUD/USD Fundamentals

• 00:30 Australian Trade Balance. Estimate -0.30B. Actual -0.12B.
• 13:30 US Trade Balance. Estimate -40.2B.
• 15:00 US IBD/TIPP Economic Optimism. Estimate 45.3 points.
• 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.