AUD/USD – Aussie Slides After Hawkish Fed Minutes, Weak Chinese PMI

The Aussie’s troubles continue on Thursday, as the currency has lost more ground to the streaking US dollar. AUD/USD has coughed up close to 200 points since early Thursday, as the Australian dollar has been unable to find its footing. The pair is trading in the mid-0.92 range, its lowest levels since September. In economic news, the Federal Reserve released its minutes, which indicated that we could see QE tapering soon. Thursday is busy, with three key US releases – PPI, Unemployment Claims and Philly Fed Manufacturing Index. Chinese Manufacturing PMI lost ground, hurting the Australian dollar. Earlier today, RBA Governor Glenn Stevens spoke at an event in Sydney.

The US dollar gained ground following the release of the minutes of the Federal Reserve’s most recent policy meeting. Policymakers said the current QE level of $85 billion monthly purchases of bonds could taper “in coming months” if the economy continued to improve. A scaling down of QE is dollar-positive, so we could see the greenback continue to make gains against the major currencies. Earlier in the week, Fed chair Bernard Bernanke said that the employment market improvement was “meaningful” and that interest rates would likely remain low even after QE ends.

In China, Manufacturing PMI continues to lose ground. The key index is struggling to remain above the 50-point level, which indicates expansion. The October reading dropped to 50.4 points, missing the estimate of 50.9. Since China is Australia’s number one trading partner, weakness in key Chinese indicators is bearish for the Australian dollar.

Earlier this week, RBA released the minutes of its most recent policy meeting. The Bank noted that there was “mounting evidence” that interest rate cuts have been effective, and trotted out its customary line that it was holding rates but reserves the right to reduce rates if needed. The RBA again railed against the high value of the Australian dollar, noting that “a lower level of the exchange rate would likely be needed to achieve balanced growth in the economy”. Ironically, despite this blunt assessment about the overvalued currency, the Aussie posted respectable gains following the release of the minutes. With the Australian dollar continuing to climb despite the RBA’s rhetoric, the Bank may have to consider further rate cuts.

AUD/USD for Thursday, November 21, 2013

AUD/USD November 21 at 15:50 GMT

AUD/USD 0.9256 H: 0.9334 L: 0.9250

AUD/USD Technical

• AUD/USD continues to lose ground in Thursday trading. The pair has been losing ground throughout the European session.
• The pair is receiving support at 0.9229. This is a weak line, and given the pair’s current downward movement, this line could be tested during the North American session. This is followed by support at 0.9119, which has remained intact since late February.
• AUD/USD pair is facing resistance at 0.9305. This is followed by a resistance line at 0.9400.
• Current range: 0.9229 to 0.9305

Further levels in both directions:

• Below: 0.9305, 0.9229, 0.9119, 0.9000 and 0.8893
• Above: 0.9400, 0.9508, 0.9613, 0.9700 and 0.9823

OANDA’s Open Positions Ratio

AUD/USD ratio remains unchanged in Thursday trading. This is not reflected in the current movement of the pair, as the Australian dollar continues to lose ground. The ratio is made up of a substantial majority of long positions, reflecting a trader bias towards the Australian dollar reversing directions and moving to higher ground.

The pair has had a busy week, and this could continue in the North American session, as the US releases key data, notably Unemployment Claims, later in the day.

AUD/USD Fundamentals

• 9:05 RBA Governor Glenn Stevens Speaks.
• 13:30 US PPI. Estimate -0.2%.
• 13:30 US Unemployment Claims. Estimate 333K.
• 13:30 US Core CPI. Estimate 0.1%.
• 14:00 US Flash Manufacturing PMI. Estimate 52.6 points.
• 14:45 FOMC Member Jerome Powell Speaks.
• 15:00 US Philly Fed Manufacturing Index. Estimate 15.8M.
• 15:30 US Natural Gas Storage. Estimate -34B.
• 18:00 FOMC Member James Bullard Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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