AUD/USD – US Dollar Surges After Fed Remarks

The US dollar was broadly higher on Wednesday, following remarks by Federal Reserve chair Janet Yellen that interest rates could go up in the US in early 2015. AUD/USD responded with losses of over 100 points, but has steadied on Thursday, as the pair trades in the low-0.90 range. In the US, Unemployment Claims easily beat the estimate. There are two other key events on the schedule, Existing Home Sales and the Philly Fed Manufacturing Index. In Australia, the RBA released its quarterly bulletin, a minor event. The CB Leading Index will be released later on Thursday.

The Federal Reserve wrapped up its policy meeting on Wednesday, the first meeting headed by Janet Yellen. The decision to trim QE by another $10 billion was widely expected, but her comments at the follow-up press conference gave the dollar a big boost against its major rivals. Yellen said that the Fed was on track to wind up QE in the fall, and could start to raise interest rates six months later. This is a more aggressive approach towards higher rates than the markets had expected, and the Australian dollar lost over 100 points against its US counterpart.

Western countries are scrambling to respond to Russia’s lightning takeover of the Ukrainian region of Crimea. The EU meets later on Thursday and may announce trade sanctions to punish Russia. Meanwhile, Ukraine says it will order its troops in Crimea to withdraw to the mainland, in order to de-escalate the extremely tense situation. The crisis has set off the worst confrontation between Russia and the West in over twenty years.

The RBA published its minutes of its most recent policy meeting on Tuesday, and there was nothing dramatic in the minutes. The central bank has kept interest rates at 2.50% since July, and the minutes indicated that this level will be maintained. The RBA said that the record-low rate was boosting growth. As for currency levels, the RBA noted that the drop in the Aussie had helped the economy achieve balanced growth, but added that the “exchange rate remained high by historical standards”.

AUD/USD for Thursday, March 20, 2014

AUD/USD March 20 at 13:00 GMT

AUD/USD 0.9022 H: 0.9039 L: 0.8996

AUD/USD Technical

• AUD/USD has steadied on Thursday, following sharp losses a day earlier.
• On the downside, 0.9000 has weakened and was briefly breached in the European session. This line could be tested again during the day. Next there is support at 0.8893.
• 0.9119 is the first line of resistance. This line has some breathing room as the US dollar has moved sharply higher. There is stronger resistance at 0.9229.
• Current range: 0.9000 to 0.9119

Further levels in both directions:

• Below: 0.9000, 0.8893, 0.8735, 0.8658 and 0.8565
• Above: 0.9119, 0.9229, 0.9361 and 0.9466

OANDA’s Open Positions Ratio

AUD/USD ratio has reversed directions in Thursday trading, pointing to gains in long positions. This is consistent with what we are seeing from the pair, as the Aussie has posted slight gains against the US dollar. AUD/USD ratio is made up of a majority of long positions, reflecting a trader bias towards the Australian dollar moving higher against the US currency.

The Australian dollar is under pressure following sharp losses on Wednesday. We could see some movement from the pair during the North American session, as the US releases key housing and manufacturing data.

AUD/USD Fundamentals

• 12:30 US Unemployment Claims. Estimate 327K. Actual 320K.
• 14:00 US Existing Home Sales. Estimate 4.65M.
• 14:00 US Philly Fed Manufacturing Index. Estimate 4.2 points.
• 14:00 US CB Leading Index. Estimate 0.3%.
• 14:30 US Natural Gas Storage. Estimate -58B.
• 20:00 US Bank Stress Test Results.

*Key releases are highlighted in bold

*All release times are GMT

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