AUD/USD – Aussie Shrugs Off Sharp Business Confidence

AUD/USD has edged higher on Monday, as the pair trades in the high-0.93 range in the North American session. In economic releases, Australian NAB Business Confidence improved in April. In the US, it’s a very quiet start to the week, with just one economic release – the US Federal Budget. The markets will be paying close attention to the Australian annual budget, which will be released early Tuesday.

US Unemployment Claims rebounded last week, as the key indicator dipped to 319 thousand. This beat the estimate of 328 thousand. The reading follows last week’s excellent Nonfarm Payrolls and Unemployment Claims. JOLTS Jobs Openings failed to keep pace, slipping to 4.01 million, well off the estimate of 4.21 million. With the employment picture brightening, market sentiment remains strong toward the US economy, and this could strengthen the US dollar.

Federal Reserve Chair Janet Yellen testified before Congress on Wednesday and Thursday, and gave a cautious thumbs-up to the economic recovery. She said that the economy has improved, but pointed to two sore spots – the job market remains weak and inflation is below the Fed’s target of 2%. Yellen stated that she therefore expects that low interest rate levels will continue for a “considerable time”. Yellen has stated previously that slack remains in the economy, and the Fed is expected to proceed carefully with future trims to its QE scheme. Since December, the Fed has trimmed the asset-purchase program by almost half, cutting it to $45 billion each month.

Strong Australian employment data in April helped lift the Australian dollar last week. Employment Change dropped to 14.2 thousand last month, but this easily beat the estimate of 7.5 thousand. The unemployment rate remained at 5.8%, better than the estimate of 5.9%. Earlier in the week, the RBA continued its low-rate monetary policy, as it maintained rates at 2.50%. Although RBA Governor Glenn Stevens remarked that the Australian dollar remains high by “historical standards”, the Aussie continues to trade at high levels. The RBA has been reluctant to lower rates in order to weaken the currency, and attempts by the central bank to “talk down” the currency have proven ineffective.

AUD/USD for Monday, May 12, 2014

AUD/USD May 12 at 13:40 GMT

AUD/USD 0.9376 H: 0.9386 L: 0.9348

AUD/USD Technical

• AUD/USD has edged higher on Monday.
• 0.9361 continues in a support role. This is a weak line and could see pressure during the day. This is followed by 0.9229.
• On the upside, 0.9446 is the next line of resistance.
• Current range: 0.9361 to 0.9446.

Further levels in both directions:

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

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in short positions in Monday trading, reversing the direction we saw on Friday. This is not consistent with the movement of the pair, as the Australian dollar has posted small gains. The ratio has a majority of long positions, indicative of trader bias towards the Australian dollar continuing its upward movement.

AUD/USD continues to trade close to the 0.94 level. The pair is unchanged in the European session.

AUD/USD Fundamentals

• 1:30 Australian NAB Business Confidence. Actual 6 points.
• 16:00 US FOMC Member Charles Plosser Speaks.
• 18:00 US Federal Budget Balance. Estimate 112.6B.

*Key releases are highlighted in bold

*All release times are GMT

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