AUD/USD – Aussie Slides Below 1.04

The Australian dollar continues to sag, and has fallen below the 1.04 level. The Aussie has been no match for the US dollar, shedding over 150 points in less than a week. US New Home Sales were a big disappointment, dropping to a six-month low. We could see some movement in Monday trading, with two key releases scheduled out of the US – Core Durable Goods Orders and Pending Home Sales. There is one release out of Australia on Monday, CB Leading Index.

AUD/USD has started the news trading week right where it left off, as it continues to lose ground. The pair is now below the 1.04 line. The markets are concerned about the health of the Australian economy, as the hard-hit export sector continues to weigh down the economy. Strong Chinese manufacturing data last week failed to stem the bleeding, and the Aussie has been on a sharp decline against the US dollar for over a week. Japan, another of Australia’s major trading partners, continues to struggle, and the weaker yen makes Australian goods and services more expensive.

Trying to gauge the extent of the US economic recovery is no simple task, especially when US releases point in all directions. The employment situation appears to be improving, as the Unemployment Claims indicator has looked outstanding for the past two weeks. Retail Sales also has looked sharp. On the other hand, we continue to see sluggish manufacturing and consumer sentiment data. As well, recent housing numbers have not looked sharp. On Friday, New Home Sales declined to 369 thousand, way off the estimate of 387 thousand. Investors are concerned about the US economy, and the uncertainty hurts riskier currencies like the Australian dollar. The US Federal Reserve has not been in the headlines lately, but is busy at work, as it increased its purchases of securities in January from $40 billion to $85 billion. This has pushed  the Fed’s balance sheet to a record $3 trillion. Despite these measures, the US recovery remains slow, and unemployment is still high at 7.8%. The markets will be paying close attention to the Fed’s take on the economy, when it meets for a key policy meeting later this week.

AUD/USD for Monday, January 28, 2013

1.0392 H: 1.0430 L: 1.0388

AUD/USD Technical

AUD/USD continues to drop, and has dipped below the 1.04 level. On the upside, 1.0424 is providing weak resistnance. This line could see further activity if there is any correction in the downward move. This is followed by resistance at 1.0508. On the downside, 1.0376 is the next support level. This line has held firm since late December, but cannot be considered safe, given the current downward trend. 1.0334 is providing stronger support.

Current range: 1.0376 to 1.0424.

Further levels in both directions:

• Below: 1.0376, 1.0334, 1.0230 and 1.0174 and 1.0031.
• Above: 1.0424, 1.0568, 1.0605, 1.0718, 1.0874 and 1.0961.

OANDA’s Open Position Ratios

The AUD/USD ratio is showing movement towards long positions. This activity is reflected in the current trend of the pair, as the US dollar continues to post gains at the expense of the Aussie. Traders can expect the current movement in the ratio to continue as the Australian dollar keeps sliding lower.

The Australian dollar continues to lose ground, unable to find its footing against the US dollar. This trend could continue in Monday’s session. There are two key US releases later in the day, and any unexpected readings could affect the direction of AUD/USD.

AUD/USD Fundamentals

• 13:30 US Core Durable Goods Orders. Estimate 0.8%
• 13:30 US Durable Goods Orders. Estimate 1.8%
• 15:00 US Pending Home Sales. Estimate 0.5%
• 23:00 Australian CB Leading Index

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.