AUD/USD – Aussie Climbs As RBA Maintains Rate

AUD/USD has posted strong gains on Tuesday, as the pair has climbed to the mid-0.93 range. The Aussie got a lift as the RBA held the benchmark interest rate at 2.50%. On the release front, Australian Trade Balance slipped to a three-month low and missed expectations. In the US, there are only three releases on the schedule, highlighted by Trade Balance. The markets are expecting a narrower deficit in April.

As expected, the RBA continued its low-rate monetary policy, leaving rates at 2.50%, where they have been since last August. Although RBA Governor Glenn Stevens remarked that the Australian dollar remains high by “historical standards”, the Aussie posted gains and crossed above the 0.93 level. In Australian releases, Australian Trade Balance slipped to $0.73 billion, well off the estimate of $1.10 billion. Building Approvals posted a decline of 3.5%, well off the estimate of a gain of 1.3%. The indicator continues to struggle, with just one gain since last October.

US employment releases looked excellent on Friday. Nonfarm Payrolls jumped to 288 thousand, easily beating the estimate of 216 thousand. The Unemployment Rate kept pace, dropping to 6.3%, its lowest level since September 2008. At the same time, the participation rate in the labor force dropped, so slack remains in the US job market, despite the strong releases in April.

The Federal QE taper train continues to chug along, as the Federal Reserve trimmed the asset purchase scheme by $10 billion last week. This marks the fourth cut since December, reducing QE to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a “considerable time” after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.

AUD/USD for Tuesday, May 6, 2014

AUD/USD May 6 at 12:50 GMT

AUD/USD 0.9350 H: 0.9353 L: 0.9271

AUD/USD Technical

• AUD/USD is posting strong gains on Tuesday, and easily pushed into 093 territory in the European session.
• 0.9229 is  providing strong support.
• On the upside, 0.9361 is under pressure as the Aussie has surged higher. Will the pair continue its upward momentum and break through? There is stronger resistance at 0.9446.
• Current range: 0.9229 to 0.9361.

Further levels in both directions:

• Below: 0.9229, 0.9119, 0.9000 and 0.8893
• Above: 0.9361, 0.9446, 0.9542, 0.9617 and 0.9703

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains by long positions in Tuesday trading. This is consistent with the movement of the pair, as the Australian dollar has posted strong gains. The ratio has a majority of long positions, indicative of trader bias towards the Australian dollar continuing to move to higher ground.

AUD/USD has improved on Tuesday, posting strong gains in the European session.

AUD/USD Fundamentals

• 14:00 Australian Trade Balance. Estimate 1.1oB. Actual 0.73 billion.
• 4:30 Australian Cash Rate. Estimate 2.50%. Actual 2.50%.
• 4:30 Reserve Bank of Australia Rate Statement.
• 12:30 US Trade Balance. Estimate -40.1B.
• 14:00 US IBD/TIPP Economic Optimism. Estimate 47.6 points.
• 21:30 US FOMC Member Jeremy Stein Speaks.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.