AUD / USD – Aussie Trade Balance Disappoints

AUD/USD has edged higher in Thursday trading, as the pair was trading in the mid-1.02 range. The pair has managed to shrug off a very weak Australian Trade Balance release, which fell well below market expectations. The other Australian release was excellent, as AIG Construction Index posted a sharp rise. In the US, there are two key releases on Thursday – Trade Balance and Unemployment Claims.

In Australian releases, AIG Construction Index shot higher, climbing to 45.6 points. The index has been mired in the 30’s range for an extended time, and this release was the index’s best showing since June 2010. If the index continues to improve and can push above the 50 line, we could see the Australian dollar react positively. The news was not as good from Trade Balance, as Australia’s trade deficit widened to 1.06 billion dollars. This surprised the markets, which had expected a smaller deficit of 0.51 billion. There are no major releases out of Australia later this week, but the markets will be monitoring two Chinese releases – Trade Balance on Friday and CPI on Saturday. Each one should be treated as a potential market-mover, which could affect the movement of AUD/USD.

In Japan, the BOJ had no surprises up its sleeve, and maintained interest rate and QE levels. The benchmark rate remained at <0.10%, while the size of the central bank’s asset purchase remained unchanged at JPY76 trillion. This policy meeting was the final one presided by governor Masaaki Shirakawa, who will be replaced by incoming governor Haruhiko Kuroda. The new governor is a proponent of strong monetary measures to kick-start the economy, and has suggested that the central bank consider purchasing more Japanese government bonds. Some analysts feel that this could cause a market bubble, with one expert warning that the BOJ’s options are limited, and that Kuroda will face a “wall of reality” when he takes the helm of the BOJ later this month. Regarding inflation, Kuroda said that the BOJ’s current policies were not strong enough to boost inflation to the government’s target of 2%. Kuroda suggested that the BOJ consider commencing its open-ended asset purchases before the scheduled start of 2014. He took pains to note that the BOJ is not targeting the yen, which has lost 12% of its value against the dollar in the past 3 months, much to the dismay and unease of Japan’s trading partners.

Recent US economic data has looked sharp, and has raised speculation that the Fed might wind up its current round of QE, which involves the purchase of $85 billion in assets each month. Although Fed Chair Bernard Bernanke and Vice-Chair Janet Yellen have recently declared that QE will continue, evidence of a stronger recovery would put pressure on the Fed to reconsider. If this week’s key employment data beats expectations, there will be more pressure on the Federal Reserve to wind down or at least modify its current stimulus package.

AUD/USD for Thursday, March 7, 2013

AUD/USD March 7 at 12:55 GMT

1.0265 H: 1.0276 L: 1.0219

AUD/USD Technical

AUD/USD has remained fairly steady in Thursday trading. The proximate support and resistance lines remain intact (S1 and R1 above). The pair is receiving support at 1.0230. This line is not a strong one, and could see more activity if the pair weakens. There is stronger support at 1.0230. On the upside, 1.0334 is providing resistance. This is followed by the resistance line at 1.0424.

Current range: 1.0230 to 1.0334

Further levels in both directions:

• Below: 1.0230, 1.0174, 1.0080, 1.00, 0.9948 and 0.9858
• Above: 1.0334, 1.0424, 1.0568 and 1.0605

OANDA’s Open Position Ratios

The AUD/USD ratio remains quiet for the second day running. This lack of activity is consistent with what we are seeing from the currency pair, as AUD/USD has been unable to sustain momentum in either direction. Traders continue to favor long positions, indicating a bias towards the Australian dollar posting some gains against the US currency.

Australian Trade Balance was a disappointment, but the Australian dollar has managed to hold its ground against the greenback in Thursday trading. With US employment numbers and Chinese Trade Balance and CPI still to come, we could see some movement from AUD/USD this week.

AUD/USD Fundamentals

• 00:30 Australian Trade Balance. Estimate. 0.51B. Actual -1.06B.
• 12:30 US Challenger Job Cuts. Actual  7.0%
• 13:30 US Trade Balance. Estimate -42.8B.
• 13:30 US Unemployment Claims. Estimate 354K
• 13:30 US Revised Nonfarm Productivity. Estimate -1.6%
• 13:30 US Revised Unit Labor Costs. Estimate. 4.4%
• 15:30 US Natural Gas Storage. Estimate -135B
• 18:15 US FOMC Jerome Powell Speaks
• 20:00 US Consumer Credit. Estimate 15.2B
• 21:30 US Bank Stress Test Results

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.