AUD/USD – Improving Aussie Pushes Above 94

AUD/USD has moved above the 0.94 line on Wednesday, marking four-week highs for the pair. In economic releases, there was good news on the US inflation front, as the Producer Price Index beat the estimate. There are no Australian releases on Wednesday.

Low inflation levels has been a persistent problem in the US, and Fed chair Yellen highlighted this issue when speaking before Congress last week. Inflation levels are nowhere near the Fed’s target of 2.0%, and weak inflation is a sign of an underperforming US economy. There was good news as PPI, a key inflation indicator, edged higher in April, coming in at 0.6%. This easily beat the estimate of 0.2%. Core PPI also beat the estimate, posting a gain of 0.5%.

US Retail Sales and Core Retail Sales are key gauges of consumer spending, and are carefully tracked by the markets. Both indicators were weak in April. Core Retail Sales dropped to 0.0%, well off the estimate of 0.6%. Retail Sales followed suit, with a paltry gain of just 0.1%, compared to an estimate of 0.5%. The weak numbers could weigh on the US dollar, which has coughed up about 100 points to the Aussie in less than a week.

Down Under, Australian housing numbers were a disappointment, as the HPI and Home Loans were weak. HPI dropped to 1.7%, down sharply from 3.4% a month earlier. This was well below the estimate of 3.0%. Home Loans posted its first decline in three months, coming in at -0.9%. The estimate stood at -0.1%. Despite, the weak numbers, the Aussie remains at high levels, trading close to the 0.94 line.

The Australian government released its first annual budget on Tuesday, introducing austerity measures in order to reduce the country’s debt. The government said that the cost-cutting measures will reduce the national debt of $49.9 billion to $29.8 billion by June 2015. The austerity budget will likely slow economic growth, which could have a negative impact on the Australian dollar.

AUD/USD for Wednesday, May 14, 2014

AUD/USD May 14 at 14:10 GMT

AUD/USD 0.9398 H: 0.9409 L: 0.9363

AUD/USD Technical

• AUD/USD has posted slight gains on Wednesday.
• 0.9361 continues in a support role. This line was tested earlier in the day. Will it remain intact? This is followed by support at 0.9229.
• On the upside, 0.9446 is the next line of resistance. 0.9542 is stronger.
• 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 Wednesday trading, continuing the direction seen a day earlier. This is not consistent with the movement of the pair, as the Australian dollar has posted slight gains. The ratio currently has a majority of short positions, indicative of trader bias towards the Australian dollar reversing directions and losing ground.

AUD/USD is trading just shy of the 0.94 level. The pair is unchanged in the North American session.

AUD/USD Fundamentals

• 12:30 US PPI. Estimate 0.2%. Actual 0.6%.
• 12:30 US Core PPI. Estimate 0.2%. Actual 0.5%.
• 14:30 US Crude Oil Inventories. Estimate -0.4M.

*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.