AUD/USD – Edges Lower as Markets Keep Eye on US Releases

AUD/USD has edged lower in Friday trading. The pair was trading in the low-1.05 range in the European session. The markets are awaiting a host of US releases later on Friday, including four key events – Core Retail Sales, Retail Sales, PPI and UoM Consumer Sentiment. In addition, Fed Chairman Bernanke will deliver remarks at a conference in Washington. There are no Australian  releases scheduled on Friday. In the US, Unemployment Claims was welcome news, as the key indicator came in well below expectations. The story was the complete opposite down under, as Australian employment numbers slumped badly.

After two straight weeks of dismal releases, the US finally broke out of the slump on Thursday. Unemployment Claims rebounded nicely, dropping from 385 thousand new claims to just 346 thousand. This easily beat the estimate of 354 thousand. The bad US numbers came from a wide section of the economy, and the markets are hoping that the worst is behind us. Friday should provide a good test, as the US posts four major releases. Strong numbers will boost markets sentiment, but additional figures off the mark are sure to raise red flags about the extent of the recovery. In Australia, the employment situation took a sharp turn downwards. After a superb reading in March, Australian Employment Claims plunged to a multi-year low, recording a drop of 36.1 thousand jobs. The markets had expected a loss of just 6.7 thousand jobs. Not surprisingly, the Unemployment Rate jumped from 5.4% to 5.6%. However, the Australian dollar was not badly affected by the weak numbers, as the plucky currency remains in 1.05 territory.

The Federal Open Market Committee released its meeting minutes on Wednesday, and the most exciting thing about the release was that it was leaked several hours ahead of schedule. The Federal Reserve was not amused, and has ordered an investigation into the matter. The minutes themselves turned out to be a non-event, with policymakers divided as to the extent and duration of the current round of QE. Some members wanted to wind down the program in the middle of 2013, while others felt it was more appropriate to wait until the end of the year. There was also discussion about whether to decrease the amount of asset purchases immediately, or continue the present levels until the end of the year. The division in opinion reflects uncertainty over the extent of the US recovery and the health of the economy. With the US reeling off a host of poor releases throughout April, FOMC members might have had a different take on the QE program had the meeting taken place in April rather than March.

In Japan, the central bank has wasted little time in implementing further easing steps, as the BOJ began purchasing Japanese government bonds earlier this week. The aggressive monetary policy announced by the BOJ has rattled the yen, which is very close to the 100 mark. However, the Aussie has benefited from the situation, as the BOJ’s easing measures have increased investor demand for higher yielding assets, such as the Australian currency.

AUD/USD for Friday, April 12, 2013

AUD/USD April 12 at 11:45 GMT

1.0529 H: 1.0561 L: 1.0515

AUD/USD Technical

AUD/USD has edged lower, and is trading in the 1.0520 range.  The proximate resistance and support levels remain in place (R1 and S1 above). The pair is facing resistance at 1.0568. This line could see pressure if the pair moves higher. This is followed by 1.0605, which has held firm since September 2012. On the downside, 1.0508 is providing support. There is a stronger support level at 1.04224.  

Further levels in both directions:

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

OANDA’s Open Position Ratios

The AUD/USD ratio is pointing to movement towards long positions. We are not seeing this reflected in the current movement of the pair, as the Australian dollar has edged lower.  This activity in the ratio could be an early sign that the Aussie will push higher against its US counterpart. The ratio continues to have a majority of short positions.

The Australian dollar has had an excellent week, despite some very disappointing employment and consumer confidence data. Friday will see a host of key US releases, so we could see some volatility from the pair, depending on whether the readings are in line with market expectations. 

AUD/USD Fundamentals

• 12:30 US Core Retail Sales. Exp. -0.1%.
• 12:30 US PPI. Exp. -0.2%.
• 12:30 US Retail Sales. Exp. 0.0%.
• 12:30 US Core PPI. Exp. 0.2%.
• 12:45 US FOMC Member Eric Rosengren Speaks.
• 13:55 US Preliminary UoM Consumer Sentiment. Exp. 79.1 points.
• 13:55 US Preliminary UoM Inflation Expectations.
• 14:00 US Business Inventories. Exp. 0.4%.
• 16:30 US Fed Chairman Bernard Bernanke Speaks.

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