AUD/USD – Posts Gains as Markets Wait for Release of RBA Minutes

The Australian dollar has managed to put the brakes on last week’s sharp plunge. AUD/USD has moved higher, and was trading in the high-97 range in Monday’s European session. The Aussie has had a miserable May, shedding a remarkable six cents since the start of the month. The US wrapped up last week on a positive note as UoM Consumer Sentiment posted a six-month high. There are no Australian releases on Monday, but the markets are eagerly awaiting the release of the RBA’s most recent policy meeting.

The markets were treated to a host of US releases last week, and for the most part, they didn’t like what they saw. US Inflation and manufacturing numbers fell below expectations, and housing numbers were also weak. Unemployment Claims, one of the most important releases and often a market-mover, had looked impressive in recent readings. However, the key indicator couldn’t keep pace last week, as the number of new claims jumped to 360 thousand, much higher than the estimate of 332 thousand. There was some good news from Building Permits, which were up nicely. On Friday, there was some relief from UoM Consumer Sentiment which jumped from 72.3 points to 83.7 points. This was well above the estimate of 77.9 points, and points to a sharp increase in consumer confidence. However, the host of weak US numbers we saw last week will again bring into question the extent of the US recovery, which has not been able to demonstrate sustained growth and continuous positive releases.

The beleaguered Aussie has been manhandled by the US dollar, and has posted sharp losses in May. The currency may not get any help from the RBA, which will release the minutes of its most recent policy meeting on Tuesday. The RBA decided at that time to cut interest rates from 3.0% to 2.75%. The move caught the markets off guard, and predictably, the Aussie lost ground. Less predictable is the fact that the currency has been in free-fall since the rate cut, losing over four cents against the US dollar. There is a strong chance that the minutes will point to the central bank’s concern about the struggling Australian economy, and this could further weigh on the shaky Australian dollar.

The US Federal Reserve has not been in the spotlight recently, but that could change if the Fed modifies its current round of quantitative easing, which involves the purchase of $85 billion in assets each month. The Fed will be tempted to act if it feels that the US recovery has gained more traction, giving it some room to ease up on QE. On Thursday, John Williams, president of the Federal Reserve Bank of San Francisco, stated that the Fed could begin reducing QE this summer and terminate bond buying late in 2013. After every solid US release, (which have been heavily outnumbered by weak data), speculation rises that the Fed could take action. As the QE program is dollar negative, any moves by the Fed to wind up QE would be bullish for the dollar at the expense of the euro. So traders can expect any new developments (real or rumor) regarding QE to impact on the currency markets.

AUD/USD for Monday, May 20, 2013

AUD/USD May 20 at 11:30 GMT

AUD/USD 97.80 H: 97.94 L: 97.36

AUD/USD Technical

AUD/USD has moved higher in the Monday session, and is trading in the high-0.97 range. The pair is receiving support at 0.9727. The next support level is at 0.9651. On the upside, the pair is testing support at 0.9795. There is stronger resistance at 99.07.

• Current range: 0.9727 to 0.9795

Further levels in both directions:

• Below: 0.9727, 0.9651, 0.9541, 0.9405 and 93.28
• Above: 0.9795, 0.9907, 1.00 and 1.0080

OANDA’s Open Positions Ratio

AUD/USD ratio is continuing the trend we saw last week, showing little change. This is not reflected in the pair’s current movement, as we are seeing a correction as the pair has posted some modest gains. Given that we have seen plenty of volatility from the pair, we can expect the ratio to show some movement at any time.

The Aussie’s bleeding has been stemmed, at least for now, as AUD/USD begins the week with some gains.  We could be in for a fairly quiet day, with no economic numbers out of the US or Australia on Monday.

AUD/USD Fundamentals

• 17:00 Federal Reserve Bank of Chicago President Charles Evans 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.