AUD/USD – Strong Gains as Aussie Barrels Across 1.04 Line

The Australian dollar has flexed some muscle in Thursday’s European session. AUD/USD has pushed above the 1.04 line, and the pair was trading in the 1.0430 range. The RBA released its quarterly Bulletin, and the markets will comb through the report for the RBA’s view on the Australian economy. Later on Thursday, CB Leading Index will be published. In the US, the Federal Reserve announced that it was maintaining its loose monetary policy. There are three major releases scheduled out of the US on Thursday – Unemployment Change, Existing Home Sales and Philly Fed Manufacturing Index.

Cyprus may be one of the Eurozone’s lightweights, but it continues to be in the financial headlines. What was supposed to be a routine bailout package for the island country has ballooned into a full-blown Eurozone financial crisis. The reason was a controversial bank levy provision in the agreement, which sent the currency markets spinning early in the week. This tax, which was aimed at all bank deposit holders, was intended to raise 5.8 billion euros, which would be a condition for Cyprus receiving the bailout funds. Cypriots were outraged, and on Tuesday, the Cypriot parliament voted overwhelmingly against the bailout. The government was not happy with the deal either, but had warned that rejecting the agreement could lead to a collapse of the nation’s banking sector. Meanwhile, the Eurozone is scrambling to salvage the bailout deal. German Chancellor Angela Merkel said she was ready to work with Cyprus to find a solution, and officials from the EU and IMF, who are the creditors behind the bailout, are in Cyprus for talks with the Cypriot government to discuss ways of making the bailout more palatable.

In the US, there were no surprises from the US Federal Reserve, which announced that it was maintaining interest rates as well as the current round of asset purchases. The benchmark interest rate remains at 0%-0.25%, and the Fed will continue to purchase $85 billion in assets each month. There had been talk of the Fed modifying its monetary policy, with the US economy shown signs of improvement, such as lower unemployment and stronger consumer spending. However, Fed chief Bernanke said that the US labor market was still weak and also noted concern about recent tax increases and federal spending cuts.

AUD/USD for Thursday, March 21, 2013

AUD/USD March 21 at 12:45 GMT

1.0430 H: 1.0439 L: 1.0364

AUD/USD Technical

AUD/USD has posted strong gains in Thursday trading, and has pushed across the 1.04 line. The pair is receiving support at 1.0424. This is a weak line, and could be tested if the US dollar shows any improvement. The next support level is at 1.0334. On the upside, there is resistance at 1.0497, which is protecting the 1.05 line. This  is followed by resistance at 1.0568.

Current range: 1.0424 to 1.0497

Further levels in both directions:

• Below: 1.0424, 1.0334, 1.0230, 1.0174, 1.0080 and 1.00
• Above: 1.0497, 1.0568, 1.0605, 1.0697 and 1.0753

OANDA’s Open Position Ratios

The AUD/USD ratio is showing little activity in the Thursday session. This is not reflective of the movement of the pair, as the Aussie has posted strong gains at the expense of the US dollar. If we continue to see sustained movement by the pair, we can expect the ratio to show some activity as well.

The Aussie has looked impressive on Thursday, and has climbed to the low-1.04 range. Will the upward momentum continue? We could see more activity from AUD/USD, as the markets wait for three key releases out of the US later today.

AUD/USD Fundamentals

• 00:30 Australian RBA Bulletin
• 12:30 US Unemployment Claims. Estimate 343K
• 13:00 US Flash Manufacturing PMI. Estimate 55.1 points
• 13:00 US HPI. Estimate 0.7%
• 14:00 US Existing Home Sales. Estimate 5.02M
• 14:00 US Philly Fed Manufacturing Index. Estimate -1.6 points
• 14:00 US CB Leading Index. Estimate 0.3%
• 14:30 US Natural Gas Storage. Estimate -70B

*Key releases are highlighted in bold

*All release times are GMT

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