AUD/USD – Aussie Edges Higher as RBA Releases Minutes

AUD/USD has edged higher, following the release of the RBA minutes from its most recent policy meeting. The pair pushed back above the 1.03 in Tuesday’s Asian session, and climbed to the 1.0330 range. In Australia, New Motor Vehicles Sales declined by 2.4%, sagging to a three-month low. The CB Leading Index and MI Leading Index will be released later on Tuesday. In the US, there is only one release – NAHB Housing Market Index.

The RBA released the minutes of its most recent policy meeting, at which time it maintained the current level of interest rates at 3.0%. The RBA noted that recent interest rate cuts had bolstered those sectors of the economy which are sensitive to interest rates. The central bank said that its “accommodative” monetary policy, in which the RBA stepped in with a string of interest rate cuts since 2011, was working. The central bank added that its forecasts for GDP growth had been revised downwards, in part due to the high Australian dollar. The RBA appears content with the present interest rate level, but is prepared to step in, depending on foreign and domestic developments.

Currency manipulation was on the agenda, as the G-20 met in Moscow over last week. The talks were attended by finance ministers and central bank governors, and the final statement included a mild comment on the recent volatility in exchange rates. The leaders pledged not to “target our exchange rates for competitive purposes”, and to move more rapidly to market-determined exchange rate systems. The G-20 statement did not make reference to Japan, which has come under fire for monetary policies which have led to a free-fall in the value of the Japanese yen. G-20 leaders appear resigned to the yen continuing to slide, but do not want Japanese officials to make public statements which will pull down the currency. Thus, Japan’s major trading partners, although not pleased about the tumbling yen, have tacitly given Japan a green light to continue to stimulate its economy with further monetary easing measures and higher inflation, which will likely have a negative impact on the yen.

Australian Treasurer Wayne Swan, who attended the G-20 meeting, dismissed talk of a “currency war”, but conceded that the strong Australian dollar has had a negative effect on the economy, including exports, mining and tourism. The Australian dollar has lost ground in 2013, but has still gained about 6 percent against the greenback since mid-2012. Swan stated that he had no problem with Japanese stimulus packages, echoing the view of the G-20 that he strongly supported market-determined exchange rates. However, Japan is a major trading partner of Australia, and a weakening yen is not good news for Australia’s hard-hit export sector.

AUD/USD for Tuesday, February 19, 2013

AUD/USD February 19 at 12:30 GMT

1.0342 H: 1.0350 L: 1.0303

AUD/USD Technical

AUD/USD has edged higher, as it pushed above the 1.03 line earlier on Tuesday. The pair is receiving weak support at 1.0334. There is stronger support at 1.0268. On the upside, 1.0424 is providing resistance. This line has held firm since early February.

Current range: 1.0334 to 1.0424.

Further levels in both directions:

• Below: 1.0334, 1.0230 and 1.0174, 1.0080 and 1.00.
• Above: 1.0424, 1.0568, 1.0605, 1.0718, 1.0874 and 1.0961.

OANDA’s Open Position Ratios

The AUD/USD ratio is showing movement towards short positions. This trend is not currently seen in the currency pair, as the Aussie has moved slightly higher. The movement in the ratio does indicate an expectation that the US dollar will improve against its Australian counterpart.

AUD/USD has posted some modest gains in Tuesday trading. Will the pair succeed in sustaining this momentum? There is only one US release on tap for today, but we will be treated to host of key US indicators later in the week, and this could result in some volatility for the pair.

AUD/USD Fundamentals

• 00:30 Reserve Bank of Australia Monetary Policy Meeting Minutes.
• 15:00 US NAHB Housing Market Index. Estimate 48 points.

*Key releases are highlighted in bold

*All release times are GMT

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