AUD/USD – Aussie Losing Ground, Dips Below 1.05 Line

AUD/USD has posted losses in Thursday trading, and finds itself below the important 1.05 level. The Australian dollar has not responded to strong Chinese Manufacturing data earlier in the day. The markets will be carefully monitoring today’s key release, US Unemployment Claims. There are no Australian releases on Thursday.

The Australian dollar has lost ground and dipped below the 1.05 line. This important level has seen a lot of activity this week, as the Aussie struggles to stay out of 1.04 territory. Strong Chinese data often is positive for the Australian currency, but that has not happened so far. Earlier on Thursday, Chinese Manufacturing PMI continued its upward trend, as the key index posted its third consecutive reading above the 50 threshold. Why the change? Some experts attribute the struggling Australian currency to recent weak economic data, notably employment and inflation numbers. Australian CPI which is released each quarter, posted a sharp drop, as it gained only 0.2% in Q4. This was in marked contrast to the robust 1.4% gain recorded in Q3 of 2012. The key consumer inflation index failed to meet the market estimate of 0.4%. The marked decrease in inflation is a worrying signal about the extent of activity in the Australian economy.

It has not been a simple task to try and measure the extent of the US economic recovery, especially when US releases point in all directions. Last week’s unemployment claims were outstanding, and retail sales looked sharp. This was offset by weak manufacturing and consumer sentiment data. Both of these sectors continue to weigh on the US economy, making it difficult for the recovery to gain some traction. As well, the most recent housing numbers fell below the estimate. With the US economy continuing to send mixed signals, the uncertainty is likely to be reflected in the currency markets.

AUD/USD for Thursday, January 24, 2013

AUD/USD January 24 at 12:15 GMT

1.0495 H: 1.05249 L: 1.0492

AUD/USD Technical

AUD/USD has been losing ground, and has slipped below the 1.05 line. On the upside, 1.0508 is providing weak resistance. This line could see further activity if the Aussie can rebound upwards. The next line of resistance is at 1.0568. On the downside, 1.0424 is a strong support line. It has not been tested since very early in January.

Current range: 1.0424 to 1.0508.

Further levels in both directions:

• Below: 1.0424, 1.0376, 1.0334, 1.0230 and 1.0174.
• Above: 1.0508, 1.0568, 1.0605, 1.0718, 1.0874 and 1.0961.

OANDA’s Open Position Ratios

The AUD/USD ratio has shown some activity, with a strong move towards long positions. This has not been reflected in the current movement by the pair, as the Aussie tests the 1.05 line. The ratio is now evenly split, and we can expect this to change if the pair continues to be active.

AUD/USD has now dropped below the 1.04 line, despite some excellent Chinese manufacturing data. Will the downward momentum continue? Australian releases have wrapped up for the week, but the US is still due to release Unemployment Claims and New Home Sales. These key readings could impact on the movement of AUD/USD, depending on the market reaction.

AUD/USD Fundamentals

• 13:30 US Unemployment Claims. Estimate 359K.
• 14:00 US Flash Manufacturing PMI. Estimate 53.2 points.
• 15:00 US CB Leading Index. Estimate 0.4%.
• 15:30 US Natural Gas Storage.
• 16:00 US Crude Oil Inventories. Estimate 2.8M.

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.