AUD/USD – Under Pressure after Dovish RBA Statement

AUD/USD is under pressure, as the pair has gotten off to a weak start in Monday trading. AUD/USD dipped below the 1.03 level in late Asian trading, and finds itself trading in the 1.0280 range. The Aussie lost ground after the Reserve Bank of Australia downgraded it GDP and inflation forecasts for the Australian economy. On Monday, Australian Home Loans was a disappointment, falling to its lowest level since mid-2010.

The Australian dollar dropped after the release of the RBA’s monetary policy statement. The quarterly report noted that the outlook for the Australian economy was weaker than November, at which time the previous statement was released. The RBA downgrade GDP growth for 2013 from 2.75% to 2.5%, and reduced its inflation estimate from 3.25% to 3.0%. RBA chief Glenn Stevens reiterated weaker inflation and growth numbers give the central bank more room to reduce interests rates to kick-start the economy, and the Aussie responded by losing ground against the greeenback. Analysts are split on whether Stevens will cut rates when the RBA meets again in March.

The markets were pleased with Friday’s US Trade Balance data, which looked sharp. The monthly deficit narrowed to $38.5 billion, well below the market forecast of $45.7 billion. This was the smallest deficit since January 2011. The markets also took note of trade data in China. The Chinese economy continues to grow at a tremendous pace, and in 2012, the Asian giant surpassed the US to become the world’s biggest trading nation, as measured by total exports and imports. US exports and imports totaled $3.83 trillion, and for the first time, China beat that figure, with total trade worth $3.87 billion. This development will surely have profound economic and political implications for both China and its trading partners. China is Australia’s biggest trading partner, and key Chinese economic releases are likely to continue to have a significant impact on AUD/USD.

AUD/USD for Monday, February 11, 2013

AUD/USD February 11 at 12:40 GMT

1.0277 H: 1.0325 L: 1.0263

AUD/USD Technical

AUD/USD remains under pressure, and has dropped below the 1.03 level. The pair is receiving weak support at 1.0268. This line is facing pressure, and could fall the Aussie continues to stumble. The next support level is at 1.0174 ,which has not been tested since last October. On the upside there is resistance at 1.0334. This is followed by a stronger line at 1.0424.

Current range: 1.0268 to 1.0334

Further levels in both directions:

• Below: 1.0268, 1.0174, 1.0031 and 0.9947.
• Above: 1.0334, 1.0424, 1.0473, 1.0530, 1.0605 and 1.0718

OANDA’s Open Position Ratios

The AUD/USD ratio has been busy at the start of the new week, and  is showing strong movement towards long positions. This is not reflected in the current move by the currency pair, as the Australian dollar continues to drop to lower levels. The movement in the ratio and the fact that most open positions are long, underscores strong trader expectation that we will see a correction to the present downward movement by AUD/USD.

AUD/USD lost ground following a dovish rate statement from the RBA, which downgraded GDP and inflation predictions. Together with a hint by the RBA that it could cut interest rates, has left the Aussie in the cold, and it is struggling against the US dollars. The pair has already dropped below the 1.03 line, and the downward slide could continue.

AUD/USD Fundamentals

• 00:30 Australian Home Loans. Estimate 0.1%. Actual -1.5%.
• 18:00 US FOMC Janet Yellin Speaks

*Key releases are highlighted in bold

*All release times are GMT

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