AUD/USD – Aussie Loses Momentum After Weak Construction, Trade Data

The Australian dollar’s strong performance this week against the US currency came to a crashing halt on Wednesday. AUD/USD has posted losses and is trading in the mid-0.93 range in the European session. The Aussie lost steam as Building Approvals and Trade Balance looked weak. Over in the US, the ISM Manufacturing PMI looked solid, beating the estimate. The US government shutdown is now its second day, as Republicans and Democrats continue to spar over how to end the budget crisis. In economic news, Wednesday’s key release is the ADP Non-Farm Employment Change. The markets are expecting very little change from the September reading. Later today, we’ll hear from Federal Reserve Chair Bernard Bernanke and FOMC member Eric Rosengren.

Australia released two key events on Wednesday, and both were disappointments. Building Approvals, known for its sharp fluctuations, declined by 4.7% in September, compared to a gain of 10.2% the month before. The markets had expected a loss of -0.7%. Meanwhile, the trade deficit widened to -$0.82 billion, its worst showing in seven months. The  estimate stood at -$0.45 billion. Earlier in the week, the RBA maintained the key interest rate at 2.50%, where it has been 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.

The US shutdown continues, as Congress remains in a partisan deadlock over how to come to some agreement over the federal budget. With the government lacking funds to operate, it has been forced to close non-essential services and send almost a million government workers home. The Republicans and Democrats are entrenched in their positions, but public pressure may force the politicians to get their act together quickly. 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.

The Federal Reserve surprised the markets in September when it didn’t taper QE, and the next dates to circle are October 29- 30, when the Fed holds its next policy meeting. Employment data will be an important factor in the Fed’s decision, and the US will release ADP Non-Farm Payrolls later on Wednesday. The all-important Non-Farm Payrolls, due for release on Friday, faces cancellation if the government shutdown continues.

AUD/USD for Wednesday, October 2, 2013

AUD/USD October 2 at 13:25 GMT

AUD/USD 0.9354 H: 0.9408 L: 0.9334

AUD/USD Technical

• AUD/USD has lost ground in Wednesday trading.
• 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 continues to receive support at 0.9328. This line has weakened as the Aussie trades at lower levels. There is stronger support at 0.9221.
• 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 is unchanged in Wednesday trading. This is not reflective of the pair’s movement, as the Australian dollar has posted losses against the US dollar.

The Australian dollar has weakened following some weak key releases on Wednesday. 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 employment data 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 Building Approvals. Estimate -0.7%. Actual -4.7%.
• 1:30 Australian Trade Balance. Estimate -0.45B. Actual -0.82B.
• 12:15 US ADP Non-Farm Employment Change. Estimate 177K.
• 14:30 US Crude Oil Inventories. Estimate 2.4M.
• 16:00 US FOMC Member Eric Rosengren Speaks. Rosengren is dovish in stance.
• 19:30 US Federal Reserve Chairman Bernard Bernanke Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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