AUD/USD – Aussie Moves Higher as Non-Farm Payrolls Disappoints

AUD/USD has moved higher in Tuesday trading, as the pair has crossed above the 0.97 line early in the North American session. The Australian dollar gained ground following a weak US Non-Farm Payrolls release, as the key employment indicator fell way below the estimate. The US unemployment rate dropped to 7.2%, a five-year low.

There was plenty of anticipation leading up to the release of US Non-Farm Payrolls on Tuesday, but the markets were left with a sour taste following the weak release. The indicator dropped to 148 thousand in September, compared to 169 thousand the month before. This was a six-month low, and was nowhere near the estimate of 182 thousand.  Although the unemployment rate dipped to 7.2%, a five-year low, the participation rate remained at 63.8%, its lowest level since 1978. These figures point to US employment market which continues to struggle to create new jobs.

After a bitter political struggle which saw the US on the brink of a sovereign default, the Republicans and Democrats finally reached an agreement last week to reopen the government and raise the debt ceiling. However, the deal provides short-term relief only – the government will be funded until January 15, while the debt limit will be raised until February 7. So, we could be right back where we started in just a few months. The dollar initially gained ground after the agreement was announced, but was broadly lower as optimism faded.

The markets had expected the Federal Reserve to taper QE back in September, but the prolonged shutdown and debt crisis will likely mean that the Fed will shy away from any QE moves until early next year. On Monday, Chicago Fed Reserve President Charles Evans reiterated his support for continued monetary stimulus, saying that the Fed would likely need a few more months of US employment data before reducing QE. Currently, the Fed is purchasing $85 billion worth of bonds each month, and any scaling back will have a strong impact on the US dollar. Evans said that he doesn’t expect the Fed to make a move at the December policy meeting, given that the deal reached in Congress to reopen the government and raise the debt ceiling does so only for a few months.

AUD/USD for Tuesday, October 22, 2013

AUD/USD October 22 at 13:30 GMT

AUD/USD 0.9711 H: 0.9712 L: 0.9644

AUD/USD Technical

• AUD/USD has moved higher on Tuesday, as the pair has crossed above the 0.97 line.
• The pair is facing resistance at 0.9821. This is followed by a resistance line at the round number of 0.9900.
• On the downside, 0.9700 as reverted to a support line. This is a weak line which could see further action. It is followed by a stronger support line at 0.9613.
• Current range: 0.9700 to 0.9821

Further levels in both directions:

• Below: 0.9700, 0.9613, 0.9508 and 0.9400
• Above: 0.9821, 0.9900 and 1.00 and 1.0076

OANDA’s Open Positions Ratio

AUD/USD ratio has reversed directions and is pointing to movement towards long positions in Tuesday trading. This is reflected in the pair’s current movement, as the Australian dollar has posted gains. A majority of the open positions in the AUD/USD ratio are long, reflecting a trader bias towards the Aussie continuing to gain ground.

The Australian dollar has received a boost from a weak Non-Farm Payrolls.  We could see the Aussie continue to post modest gains during the day.

AUD/USD Fundamentals

• 23:00 Australian CB Leading Index.
• 12:30 US Non-Farm Employment Change. Estimate 182K. Actual 148K.
• 12:30 US Unemployment Rate. Estimate 7.3%. Actual 7.2%.
• 12:30 US Average Hourly Earnings. Estimate 0.2%. Actual 0.1%.
• 13:00 US TIC Long-Term Purchases. Estimate 30.9B. Actual -8.9B.
• 14:00 US Construction Spending. Estimate 0.5%.
• 14:00 US Richmond Manufacturing Index. Estimate 0 points.
• 14:30 US Natural Gas Storage. Estimate 81B.

*Key releases are highlighted in bold

*All release times are GMT

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