AUD/USD – Climbs Above 0.90 As RBA Maintains Rates

The Australian dollar has battled back and pushed deep into 0.90 territory in Tuesday trading. AUD/USD is trading in the mid-0.90 range early in the North American session. The Reserve Bank of Australia held rates at 2.50%, as expected. In other economic news in Australia, Retail Sales fell below the estimate. Current Account also disappointed, posting a larger deficit than expected. In the US , today’s key release is ISM Manufacturing PMI.

As widely expected, the RBA held the benchmark interest rate steady at 2.50%. The RBA refrained from discussing possible rate cuts, which likely would have spooked investors and hurt the Aussie. The Australian central bank has made no secret of the fact that it would like the Australian dollar to fall further, but is unlikely to reduce rates if the currency remains close to the 0.90 level. In other news, Retail Sales, a key event, posted a weak gain of 0.1%, falling short of the estimate of 0.4%. The disappointing reading points to weak consumer spending, which is critical if the Australian economy is to pick up speed. There was more negative news from Current Account, as the deficit rose from -8.5 billion dollars in Q1 to -9.4 billion in Q2. The estimate stood at -8.9 billion dollars.

The markets displayed some volatility last week in anticipation of an expected US military strike against Syria, after a chemical attack in the war-torn country killed hundreds. However, the attempt by the US to secure a coalition ran into trouble, and President Obama said on the weekend that he will seek Congressional approval before taking any action against Syria. With Congress in recess until September 9th, a military strike could be delayed until mid-September or even later. Meanwhile, the markets have now settled down as we begin the new trading week.

When will the Federal Reserve taper QE? The Federal Reserve has not given any hints, and recent statements from Fed policymakers underscore divisions regarding the timing of such a move. What is clear is that stronger US numbers will increase the likelihood of the Fed acting sooner rather than later. This means that US releases, especially employment data, will be under the market microscope and traders should be prepared for the Fed to begin tapering at any time, which will likely bolster the US dollar.

AUD/USD for Tuesday, September 3, 2013

AUD/USD September 3 at 13:25 GMT

AUD/USD 0.9044 H: .9048 L: 0.8972

AUD/USD Technical

• AUD/USD continues to improve in Tuesday trading. The pair pushed above the 0.90 line late in the Asian session and has posted further gains in European trading.
• The pair is facing resistance at 0.9089. This line could face pressure if the Aussie’s rally continues. This is followed by stronger resistance at 0.9135.
• On the downside, the pair is receiving support at the round number of 0.9000. This line saw action earlier and cannot be considered safe. This is followed by support at 0.8926.
• Current range: 0.9000 to 0.9089

Further levels in both directions:

• Below: 0.9000, 0.8926, 0.8848, 0.8747 and 0.8578
• Above: 0.9089, 0.9135, 0.9221 and 0.9328

OANDA’s Open Positions Ratio

AUD/USD ratio has finally shown some movement, pointing towards short positions. This is not reflected in the pair’s current movement, as the Australian dollar continues to post gains. The ratio is made up of a solid majority of long positions, indicating that trader sentiment is strongly biased towards the Australian dollar continuing to improve against the US currency.

The Australian dollar has looked sharp, gaining over one cent so far this week. Will the upward trend continue? With the US releasing a key PMI later in the day, we could see further activity from the pair during the day.

AUD/USD Fundamentals

• 1:30 Australian Retail Sales. Estimate 0.4%. Actual 0.1%.
• 1:30 Australian Current Account. Estimate -8.3B. Actual -9.4B.
• 4:30 RBA Cash Rate. Estimate 2.50%. Actual 2.50%.
• 4:30 RBA Rate Statement.
• 23:30 Australian AIG Services Index.
• 13:00 US Final Manufacturing PMI. Estimate 53.9 points. Actual 53.1 points.
• 14:00 US ISM Manufacturing PMI. Estimate 54.2 points.
• 14:00 US Construction Spending. Estimate 0.3%.
• 14:00 US IBD/TIPP Economic Optimism. Estimate 46.2 points.
• 14:00 US ISM Manufacturing Prices. Estimate 51.6 points.

*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.