AUD/USD – Higher as Consumer Confidence Data Sparkles

AUD/USD posted gains following the release on Tuesday of strong Australian consumer confidence numbers. Consumer Sentiment data was up sharply. The Australian dollar took advantage and pushed above the 1.03 level. There was more good news out of the US, as the Federal Budget Balance posted a rare surplus. Today’s highlights are US Retail sales and Core Retail Sales.  There are no releases scheduled for Tuesday out of Australia.

The Australian dollar got a badly needed boost from some solid data, as Consumer Sentiment jumped 7.7% in January. This was the indicator’s strongest gain since September 2011. It comes on the heels of solid Business Confidence data, raising hopes that improving consumer and business confidence will translate into increased buying and investing, which is critical for economic growth. In the US, the Federal Budget Balance, surprised the markets, posting a surplus of $2.9 billion. The markets had expected a deficit of $4.6 billion.

The Australian housing market is going through rough times, and Australian banks have cut their mortgage rates in response. Will Australian consumers bite and take advantage of cheaper home loans? The RBA reduced rates last October and December, but borrowing levels have not increased. The central bank is unlikely to cut rates in the near future, as unemployment has been rising and inflation is weak. Many investors who were hoping for higher interest rates in Australia will now be looking to park their funds elsewhere, and this has hurt the Australian dollar. 

The G-20 Summit takes place later this week, and an important topic on the agenda will be the issue of exchange rates, notably, the plunging Japanese yen. There is mounting concern about “currency wars”, as countries are increasingly relying on monetary policy to kick-start their flagging economies. An official from the G-7 expressed concern about the sharp and rapid descent of the yen, which has lost about 16% of its value against the dollar in the past three months. The Institute of International Finance, which is comprised of leading banks and financial institutions, also weighed in on the matter. It urged the G-20 to take steps to avoid the “possible discord on exchange rates”. Japan’s trading partners are alarmed by the sinking yen, but the Japanese government has been brushing off international criticism of its monetary policies. Japanese Finance Minister Taro Aso stated that the monetary easing measures are needed to deal with deflation and the government is not actively devaluing the yen. Anyone expecting fireworks at the G-20 over currency manipulations is likely to be disappointed – given the need to reach a consensus, analysts expect any statement on exchange rates to be mild in nature.

AUD/USD for Wenesday, February 13, 2013

AUD/USD February 13 at 13:00 GMT

1.0331  H: 1.0336 L: 1.0319

AUD/USD Technical

AUD/USD is showing little movement after Monday’s strong gains. The pair is testing the resistance line of 1.0334. This line is followed by 1.0424, which has not been tested since last week. On the downside, there is support at 1.0268. This line has stregthened as the pair trades above the 1.03 line.

Current range: 1.0268 to 1.0334

Further levels in both directions:

• Below: 1.0268, 1.0174, 1.0031 and 0.9959 and 98.47
• Above: 1.0334, 1.0424, 1.0473, 1.0530 and 1.0605

OANDA’s Open Position Ratios

The AUD/USD ratio has reversed dramatically, pointing to strong movement towards the short positions. We are not seeing this trend reflected in the currency pair as the Australian dollar has leveled off after Tuesday’s gains. The present activity in the ratio could signal that the US dollar will rebound against the Aussie. 

AUD/USD  didn’t capitalize on positive business confidence numbers out of Australia, but did climb higher after strong consumer confidence numbers on Tuesday. The markets are pleased with these two readings, but still has strong doubts about the health of the Australian economy. We could see stronger movement from AUD/USD if today’s US retail sales numbers do not line up with expectations. 

AUD/USD Fundamentals

• 2:00 US President Obama delivers State of the Union Address.
• 13:30 US Core Retail Sales. Estimate 0.1%.
• 13:30 US Retail Sales. Estimate 0.1%.
• 13:30 US Import Prices. Estimate 0.8%.
• 15:00 US Treasury Secretary Jack Lew Speaks.
• 15:00 US Business Inventories. Estimate 0.3%.
• 15:30 US Crude Oil Inventories. Estimate 2.4M.
• 16:10 US FOMC Member James Bullard Speaks.
• 18:00 US 10-year Bond Auction.
• 23:50 Japanese Preliminary GDP. Estimate 0.1%.
• 23:50 Japanese Preliminary GDP Price Index. Estimate -0.5%.

*Key releases are highlighted in bold

*All release times are GMT

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