AUD / USD – Aussie Breaks Out, Punches Past 1.03 Line

 AUD/USD continues to push higher, and has crossed above the 1.03 level in Tuesday’s European session. The Australian dollar has now climbed about one cent on the week. The Aussie managed to shrug off disappointing Australian data on Tuesday. NAB Business Confidence fell to just one point, after holding steady at three points for the past two readings. The markets will be hoping for better news from the Westpac Consumer Sentiment, which will be released later on Tuesday. In the US, the NFIB Small Business Index pushed across the 90-point level for the first time since November 2012, climbing to 90.8 points. However, the indicator still fell short of the estimate of 91.3 points. The US will release the Federal Budget Balance, and the markets are bracing for a deficit of $200.0 billion.

The markets are also closely monitoring developments in Japan, which is Australia’s  second biggest trading partner. On Monday, there were tough comments from the incoming BOJ head. During confirmation hearings, Haruhiko Kuroda declared that he would do “whatever it takes” to beat deflation and reach the government’s inflation target of 2.0%. The incoming governor reiterated that he is confident that an effective monetary policy could defeat deflation, which continues to weigh heavily on the Japanese economy. Kuroda noted that the current amount of asset buying by the BOJ will not achieve the 2.0% inflation goal. This type of rhetoric is certainly not new, but the markets were reacting to media reports that Kuroda may start implementing more easing right after he takes office next week and not wait for the BOJ’s next policy meeting in April. There were no surprises from the BOJ’s minutes from the February meeting, at which the central bank maintained its monetary policy. Some members stated they were in favor of buying Japanese Government Bonds with longer remaining maturities if additional monetary easing is needed in the future.

In the US, there are hopes that the recovery is strengthening, following excellent employment numbers. Employment Change shot higher, and the Unemployment Rate dropped to 7.7%, its lowest level since 2008. The improving economy has led to speculation that the Fed might end the current round of QE, which involves the purchase of $85 billion in assets each month, earlier than expected. In one possible scenario, the Fed would let mature the trillions of dollars in securities they have purchased, rather than saturate the market with a huge amount of securities. The US economy has been bumpy, and has not responded all that well to the Fed’s massive purchase of assets. This “new exit” strategy could take place later in year, and would be a dramatic shift in the Federal Reserve’s current monetary policy.

AUD/USD for Monday, March 12, 2013

AUD/USD March 12 at 12:25 GMT

1.0318 H: 1.0324 L: 1.0268

AUD/USD Technical

AUD/USD has broken out of narrow range trading in Tuesday’s European session. The pair is facing resistance at 1.0334. This is a weak line, and given the current upward trend, this line could face pressure from the pair. There is stronger resistance at 1.0424. On the downside, the pair is receiving support at 1.0230. This line has strengthened as AUD/USD trades at higher levels.

Current range: 1.0230 to 1.0334

Further levels in both directions:

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

OANDA’s Open Position Ratios

The AUD/USD ratio has gone quiet, after pointing to long positions on Monday. This lack of activity is not reflected in the pair’s current, movement, as the Australian dollar has been making gains in today’s European session. If the pair continues to push upwards, we are likely to see some increased activity in the ratio. 

After a slow start to the week, the Australian dollar has rallied, gaining about a cent at the expense of the US dollar. Will the upward momentum continue? Australia will release consumer sentiment numbers later on Tuesday, and the reading could affect the movement of AUD/USD. 

AUD/USD Fundamentals

• 00:30 Australian NAB Business Confidence. Actual 1 point.
• 23:30 Westpac Consumer Sentiment
• 11:30 US NFIB Small Business Index. Estimate 91.3 points
• 18:00 US Federal Budget Balance. Estimate -200.0B

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.