AUD/USD – Critical 90 Line Under Strong Pressure

The Australian dollar continues to lose ground against the US currency. The pair is struggling in the low-0.90 range in European trade on Wednesday. In economic releases, Australian Private Sector Credit edged higher, surpassing the estimate. In the US, it’s a busy day with three key releases – ADP Non-Farm Employment Change, Advance GDP and the Federal Reserve’s FOMC Policy Statement.

The Aussie has been in free-fall, shedding about 230 points so far this week. AUD/USD lost over a cent on Monday, courtesy of a dismal release from Australian Building Approvals. The key construction indicator posted a decline of -6.9%, its worst showing since December 2012. The weak release raises questions about the health of the construction and housing industries, both of which are important engines for economic growth. We’ll get a look at housing data later in the week, with the release of HIA New Home Sales.

There was further pressure on the Aussie as RBA Governor Glenn Stevens hinted that there was further room for an interest rate reduction next week. Stevens complained about low business confidence, the end of the mining boom and even criticized the government for not providing a specific date for the election. This is not the first time that Stevens has made comments which have impacted on the currency markets. As far as the Australian dollar is concerned, it seems the less heard from Stevens, the better.

Over in the US, consumer confidence numbers have looked solid. CB Consumer Confidence dropped from 81.4 to 80.3 points, but this is still a very strong release in comparison to the readings earlier in 2013. Late last week, UoM Consumer Sentiment rose to 85.1 points, its highest level in six years. The magic question is will stronger levels of consumer confidence translate into increased borrowing and spending, which will help create jobs and bolster the recovery. We’ll have to wait and see if upcoming US releases follow suit and point higher.

AUD/USD for Wednesday, July 31, 2013

AUD/USD July 31 at 12:10 GMT

AUD/USD 0.9016 H: 0.9072 L: 0.9008

AUD/USD Technical

AUD/USD continues to lose ground, and is putting strong pressure on the significant 0.9000 level. The pair dropped to a low of 0.9008 early in the European session. 0.8916 is the next support line. On the upside, the pair faces resistance at 0.9072. This is followed by resistance at 0.9135, which has strengthened as the Aussie continues to drop lower.

• Current range: 0.9000 to 0.9072

Further levels in both directions:

• Below: 0.9000, 0.9072, 0.9000, 0.8916, 0.8747 and 0.8578
• Above: 0.9135, 0.9221, 0.9328, 0.9405, 0.9541 and 0.9657

OANDA’s Open Positions Ratio

AUD/USD ratio continues to point in the direction of long positions. With the pair suffering sharp losses, a large number of short positions have been covered, thus increasing the proportion of open long positions. We could see this trend continue if the Aussie continues to lose ground.

The Aussie has resumed its losing ways, and has reached close to the 0.90 level. Will AUD/USD break below this crucial barrier? We could have an answer as early as the North American session on Wednesday, with the US releasing several key events. If the markets like the sound of the US releases, we could see the Aussie drop even further.

AUD/USD Fundamentals

• 1:30 Australian Private Sector Credit. Estimate 0.3%. Actual 0.4%.
• 12:15 US ADP Non-Farm Employment Change. Estimate 179K.
• 12:30 US Advance GDP. Estimate 1.1%.
• 12:30 US Advance GDP Price Index. Estimate 1.1%.
• 12:30 US Employment Cost Index. Estimate 0.4%.
• 13:45 US Chicago PMI. Estimate 53.7 points.
• 14:30 US Crude Oil Inventories. Estimate -21.M.
• 18:00 US FOMC Statement.
• 18:00 US Federal Funds Rate. Estimate <0.25%.
• 23:30 Australian AIG Manufacturing Index.

*Key releases are highlighted in bold

*All release times are GMT

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