AUD/USD – Aussie Jumps Following Solid Retail Sales

AUD/USD has shot higher in Tuesday trading. The Australian dollar has jumped about one cent against its US counterpart and is trading close to the 0.94 line early in the North American session. The Australian dollar received a boost from a solid Australian Retail Sales release and the US dollar is under pressure as the US government shutdown kicks in on Tuesday. In other economic news, the RBA maintained its key interest rate at 2.50%. In the US, today’s key release is ISM Manufacturing PMI.

Australian Retail Sales looked strong in August, and this has helped the Aussie post impressive gains on Tuesday. Retail Sales rose 0.4%, a six-month high. This beat the estimate of 0.1%, and points to stronger consumer spending, which is essential for economic growth. As expected, the RBA did not adjust interest rates on Tuesday. The key interest rate has been pegged at 2.50% since July. In its Rate Statement, the RBA left the door open for future cuts and reiterated that it would like to see a lower Australian dollar.

With Congress failing to reach an agreement on the budget before October 1, the US government has now shut down non-essential services. This last happened in 1996, and politicians on both sides of the divide will be trying to hammer out a compromise to end the crisis. Both sides seem entrenched in their positions. Republicans want to defund Obamacare before they approve a budget, and the Democrats are determined to protect their health care bill. If things are resolved sometime this week, it will have been more of a nuisance than a crisis. However, a much more serious crisis could occur in two weeks if Congress doesn’t reach an agreement on raising the debt ceiling. If that happens, the Treasury would be unable to pay all of its bills, and the economic fallout could be tremendous.

AUD/USD for Tuesday, October 1, 2013

AUD/USD 0.9394 H: 0.9436 L: 0.9289

AUD/USD Technical

• AUD/USD has posted sharp gains in Tuesday trading. The pair has been moving upwards since late in the Asian session.
• The pair is testing resistance at the round number of 0.9400. This is followed by stronger resistance at 0.9508.
• On the downside, the pair is receiving support at 0.9328. Next, there is a support level at 0.9221, which has some breathing room as the pair trades at higher levels.
• Current range: 0.9328 to 0.9400

Further levels in both directions:

• Below: 0.9328, 0.9221, 0.9135, 0.9089 and 0.9000
• Above: 0.9400, 0.9508, 0.9613 and 0.9700

OANDA’s Open Positions Ratio

AUD/USD ratio continues to point to long positions in Tuesday trading. This is reflective of the pair’s movement, as the Australian dollar has moved higher against the US dollar.

The Australian dollar has rebounded nicely after recent losses and is testing the 0.94 level. We could see further volatility from the pair if no progress is made on the US budget deadlock. As well, the US releases a key PMI later today, and this could affect the movement of the pair if the reading is not in line with market expectations.

AUD/USD Fundamentals

• 1:30 Australian Retail Sales. Estimate 0.3%. Actual 0.4%.
• 4:30 RBA Cash Rate. Estimate 2.50%. Actual 2.50%.
• 4:30 RBA Rate Statement.
• 6:30 RBA Commodity Prices. Estimate -3.1%.
• 13:00 US Final Manufacturing PMI. Estimate 52.8 points.
• 14:00 US ISM Manufacturing PMI. Estimate 55.3 points.
• 14:00 US ISM Manufacturing Prices. Estimate 55.2 points.
• Tentative – US Construction Spending. Estimate 0.5%.
• All Day – US Total Vehicle Sales. Estimate 16.1M.

*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.