AUD/USD – Sharp Losses as Aussie Retail Sales Slumps

AUD/USD started the new trading week pointing downwards, as the pair slid to the low-1.02 level in Monday’s European session. The Aussie took a hit as Australian Retail Sales and ANZ Job Advertisements looked weak. There are no US releases on Monday.

 Australia started the trading week with several releases, the highlight being Retail Sales. After a strong gain of 1.3% in the previous reading, the key indicator posted a decline of 0.4% in the May release. This missed the forecast of a 0.2% gain, and sent the Aussie lower. In other Australian releases, MI Inflation Gauge posted a 0.3% gain, up from 0.2%. There was more disappointing news as ANZ Job Advertisements declined 1.3%. The employment indicator has not looked sharp, recording only one monthly gain in 2013. The markets are waiting for Trade Balance figures, which will be released early on Tuesday.

In Japan, the yen is back to its losing ways after its recent improvement against the US dollar. The Japanese currency crossed above the 99 line on Friday, and is again within striking distance of the elusive 100 line. At its recent policy meeting, the BoJ noted that it could take more than two years to reach its 2% inflation target. This possibility has been underscored by recent Japanese inflation releases, which continue to point to deflation in the economy, despite the best efforts of the BOJ to create some inflation. This could mean that the central bank will resort to further easing measures later in the year, which is bearish for the yen. So there is still an expectation in the markets that the yen will continue to lose ground, as it has since late last week.

Back in the US, last week’s employment numbers were welcome news, as the US has been churning out mostly weak key releases. Unemployment Claims came in below expectations for the second straight week. The key indicator dropped from 339 thousand to 324 thousand, blowing past the estimate of 346 thousand. On Friday, Non-Farm Payrolls climbed to 165 thousand. This easily beat  the estimate of 146 thousand. As well, the Unemployment Rate fell from 7.6% to 7.5%. Improving employment numbers are critical for economic growth, and the markets are hoping that the good news continues.

AUD/USD for Monday, May 6, 2013

AUD/USD May 6 at 13:10 GMT

AUD/USD 1.0226 H: 1.0307 L: 1.0224

AUD/USD Technical

AUD/USD has dropped sharply in Monday trading. The pair is testing 1.0230 on the upside. The There is a stronger support level at 1.0174. On the upside, the pair is facing resistance at 1.0350. This is followed by a resistance line at 1.0424.

Current range: 1.0174 to 1.02230

Further levels in both directions:

• Below: 1.0174, 1.0080, 1.00, and 99.83
• Above: 1.0230, 1.0298, 1.0350, 1.0424 and 1.0508

OANDA’s Open Positions Ratio

The ratio continues to have a large majority of long positions, indicating a strong bias for the US dollar to post further gains. We are currently seeing this reflected by the pair, as the Aussie has started the week by posting losses against the US dollar.

The Australian dollar took a hit as Retail Sales missed its estimate, and Job Advertisements posted another decline. There is further room for the Aussie to drop, and if Tuesday’s Trade Balance numbers do not meet expectations, we could see the pair drop further.

AUD/USD Fundamentals

• 00:30 Australian Inflation Gauge. Actual 0.3%.
• 1:30 Australian Retail Sales. Estimate 0.2%. Actual -0.4%.
• 1:30 Australian ANZ Job Advertisements. Actual -1.3%.
• 23:30 Australian AIG Construction Index. 

*Key releases are highlighted in bold

*All release times are GMT

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