AUD/USD – Sharp Losses for Aussie on Weak Import Prices, Fed Statement

AUD/USD sustained sharp losses on Thursday, as the pair has shed over 100 points. The pair is trading just shy of the 0.78 line in the North American session. Taking a look at today’s releases, Australian Import Prices gained 0.9% but fell short of expectations. In the US, Unemployment Claims sparkled, dropping to 265 thousand. However, Pending Home Sales declined 3.7%.

US employment numbers have improved as the economy chugs along. This was underscored by Unemployment Claims, which plunged to 265 thousand, down from 307 thousand a week earlier. This marked the indicator’s lowest level since April 2000. The news was not as positive from Pending Home Sales, which declined 3.7%, its worst reading in a year.

On Wednesday, the Federal Reserve reiterated that it would be “patient” regarding the timeline for a raise in interest rates, which have been close to zero since 2008. However, the Fed gave a vote of confidence to the US economy, noting that the economy was expanding at a “solid pace”. This boosted the US dollar as the Australian currency posted sharp losses. The markets expect the Fed to raise rates sometime during the year, so the “Fed rate watch” is sure to continue, as the markets look for clues as to when the Fed will make a move.

Australian Import Prices rebounded to 0.9%, but this was well short of the forecast of 1.5%. If Australian data continues to miss expectations, pressure will increase on the RBA to lower interest rates in order to boost economic growth. Such a move would likely see the Aussie post losses against the US dollar. We’ll get a look at PPI on Friday, with the markets expecting a slight gain of 0.3%.

Earlier in the week, Australian CPI, the primary gauge of consumer inflation, dropped to just 0.2% in Q4, shy of the forecast of 0.3%. This was the index’s weakest gain in two years. However, there was much better news from Trimmed Mean CPI, which posted a strong gain of 0.7%, beating the estimate of 0.5%.

AUD/USD for Thursday, January 29, 2015

AUD/USD January 29 at 15:35 GMT

AUD/USD 0.7799 H: 0.7907 L: 0.7766

AUD/USD Technical

• AUD/USD edged lower in the Asian session. The pair posted sharp losses in European trade, easily breaking below support at 0.7904 and testing support at 0.7999. Early in the North American session, the pair is unchanged.
• 0.7799 is fluid and could break in the North American session. 0.7684 is stronger.
• 0.7904 has reverted to a resistance line as the pair has posted sharp losses.
• Current range: 0.7799 to 0.7904

Further levels in both directions:

• Below: 0.7799, 0.7684, 0.7528 and 0.7403
• Above: 0.7904, 0.8081, 0.8150, 0.8214 and 0.8315

OANDA’s Open Positions Ratio

AUD/USD ratio is unchanged on Thursday. This is not consistent with the movement of the pair, as the Aussie has posted sharp losses. The ratio has a majority of long positions, indicative of trader bias towards AUD/USD recovering and moving higher.

AUD/USD Fundamentals

•  00:30 Australian Import Prices. Estimate 1.5%. Actual 0.9%
• 13:30 US Unemployment Claims. Estimate 301K. Actual 265K
• 15:00 US Pending Home Sales. Estimate +0.6%. Actual -3.7%
• 15:30 US Natural Gas Storage. Estimate -113B. Actual -94B

*Key releases are highlighted in bold

*All release times are GMT

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