AUD/USD – Little Movement as Markets Eye US Releases

AUD/USD is very quiet in Friday trading, as the pair continues to trade in the  mid-1.02 range. The Australian dollar has now lost over one cent since Wednesday. The currency fell as the markets reacted negatively to a sharp decline in Australian Building Permits. On Friday, AUD/USD shrugged off Australian PPI, which rose slightly, from 0.2% to 0.3%. The estimate stood at 0.2%. In the US, there was good news on Thursday as the Trade Balance and Unemployment Claims beat expectations. The markets are keeping a close eye on the US, which will release three key events later today – Non-Farm Payrolls, the Unemployment Rate and ISM Non-Manufacturing PMI.

On Thursday, the ECB pulled the trigger and reduced interest rates to 0.50%, a record low. The rate had been pegged at 0.75% since July 2012. The move was widely expected, as the Eurozone economy remains in poor shape, and many of the major European economies are in recession. However, the euro initially moved higher before dropping sharply. The catalyst for the drop was comments by ECB head Mario Draghi that he was considering a negative deposit rate for banks. The deposit rate, which is what the ECB pays Eurozone banks for overnight deposits, currently stands at 0%. A negative rate could lead to funds flowing out of the Eurozone, and the euro was down more than one cent on Thursday as a result.

The US has been weighed down with poor releases since late March, so Thursday’s solid numbers were welcome news. The US trade deficit narrowed from $43.0 billion to $38.8 billion, easily beating the estimate of $42.1 billion. A well, Unemployment Claims were below expectations for the second straight week. The key indicator dropped from 339 thousand to 324 thousand, blowing past the estimate of 346 thousand. We’ll get a better picture of the US employment situation on Friday, as the US releases Non-Farm Payrolls and the Unemployment Rate.

Anyone who was expecting some dramatic news out of the Fed on Wednesday was sorely disappointed. The FOMC policy statement on Wednesday said little, as the Fed basically noted that it wasn’t willing to take further steps, despite signs of weakness in the US economy. There was no indication that the Fed would make any changes (higher or lower) to its current QE program of purchasing $85 billion in assets each month. The Fed did criticize the government’s economic policy, stating that current fiscal policy was restraining economic growth.

AUD/USD for Friday, May 3, 2013

AUD/USD May 3 at 9:40 GMT

1.0252 H: 1.0279 L: 1.0245

AUD/USD Technical

AUD/USD is keeping a low profile in Friday trading, staying close to the mid-1.02 range. The pair continues to receive support at 1.0230. This line remains weak, and could be tested if the Aussie loses any ground. There is a stronger support level at 1.0174. On the upside, the pair is facing resistance at 1.0350. This is followed by a resistance line at 1.0424.

Current range: 1.0230 to 1.0350

Further levels in both directions:

• Below: 1.0230, 1.0174, 1.0080 and 1.00.
• Above: 1.0350, 1.0424, 1.0508 and 1.0568

OANDA’s Open Positions Ratio

The ratio continues to have a large majority of long positions, indicating a strong bias for the US dollar to post further gains. We are currently seeing this reflected by the pair, as the Aussie continues to lose ground against the US currency.

The Australian dollar has been struggling since mid-week, as it finds itself trading in the mid-1.02 range. The pair has settled down, but we could see some movement on Friday, as the US releases key employment data and a non-manufacturing PMI later in the day.

AUD/USD Fundamentals

• 1:30 Australian PPI. Estimate 0.2%. Actual 0.3%.
• 12:30 US Non-Farm Employment Claims. Estimate 146K.
• 12:30 US Unemployment Rate. Estimate 7.6%.
• 12:30 US Average Hourly Earnings. Estimate 0.2%.
• 14:00 US ISM Non-Manufacturing PMI. Estimate 54.1 points.
• 14:00 US Factory Orders. Estimate -2.8%.
• 16:30 US Federal Reserve Governor Daniel Tarullo Speaks.

*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.