AUD/USD – Steady After Aussie’s Super Tuesday

The Australian dollar has steadied after outstanding gains on Tuesday, in which the currency garnered about 160 points. On Wednesday, AUD/USD is trading in the low-0.89 range. The Aussie took off after the RBA changed its monetary stance to a neutral bias and softened its recent rhetoric about the high value of the Aussie. The RBA held the benchmark interest rate at 2.50%. Over in the US, there are two key releases today – ADP Non-Farm Employment Change and ISM Non-Manufacturing PMI. There are no Australian releases on Wednesday but we’ll get a look at Retail Sales early on Thursday.

With the Federal Reserve continuing its tapering program, US employment releases will be under the market microscope. A strong ADP Non-Farm Employment Change release later in the day would be an important indication that the US employment front is improving and that could give the dollar a boost. This will be followed on Friday with the official Non-Farm Employment Change release. In the US, ISM Manufacturing PMI, a key event, looked awful in January. The index came in at 51.3 points, a sharp drop from the December reading of 57.0. This was well below the estimate of 56.2 points. The markets will be looking for better news from the ISM Non-Manufacturing PMI later on Wednesday. If this index also disappoints, the US dollar could continue to lose ground.

On Tuesday, the Reserve Bank of Australia maintained the benchmark interest rate at 2.50%, where it has been pegged since August. This didn’t grab much attention from the markets, but the Rate Statement did and the Aussie shot higher in response. Governor Glenn Stevens noted that interest rates are at an appropriate level, indicating a shift in stance from easing to neutral. He also made a point of noting the Australian dollar’s recent slide, stating that the lower value of the currency will “assist in achieving balanced growth” for the Australian economy. Importantly, Stevens refrained from saying that the Australian dollar was “uncomfortably high” as he has done in the past. The RBA has room to be pleased, as the Aussie has shed 8% of its value in the past three months. However, if the Aussie rebounds and rises into the low-90s, we could see the RBA again attempt to “talk down” the currency.

Australian releases started the week on a disappointing note, as Building Approvals declined by 2.9%. This was the fourth decline in five readings, pointing to ongoing contraction in the construction industry. ANZ Job Advertisements, an important employment indicator, posted its fourth straight drop, coming in at -0.3%. There was no relief from Commodity Prices, which declined by 9.9%, a six-month low. However, the Aussie held its own despite the weak numbers on Monday.

AUD/USD for Wednesday, February 5, 2014

AUD/USD February 5 at 14:00 GMT

AUD/USD 0.8916 H: 0.8938 L: 0.8874

AUD/USD Technical

• AUD/USD is showing little movement in Wednesday trading, as the pair trades slightly above the 0.89 line.
• 0.8893 is providing support. This is a weak line that could be tested during the day. This is followed by support at 0.8735.
• On the upside, the key level of 0.9000 is the next line of resistance. It is followed by resistance at the key level of 0.9119.
• Current range: 0.8893 to 0.9000

Further levels in both directions:

• Below: 0.8893, 0.8735, 0.8658, 0.8505 and 0.8425
• Above: 0.9000, 0.9119, 0.9229 and 0.9361

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged in Wednesday trading, continuing the trend that we saw on Tuesday. This is consistent with what we are seeing from the pair, which is showing little movement. AUD/USD ratio is made up of a substantial majority of long positions, reflecting a trader bias towards the Australian dollar moving higher against the US currency.

The Australian dollar has settled down in Wednesday trading. With the US releasing key employment and services data later in the day, we could see AUD/USD show some movement in the North American session.

AUD/USD Fundamentals

• 13:15 US ADP Non-Farm Employment Change. Estimate 191K.
• 14:00 US Final Services PMI. Estimate 56.6 points.
• 15:00 US ISM Non-Farm Manufacturing PMI. Estimate 53.6 points.
• 15:00 US FOMC Member Daniel Tarullo Speaks.
• 15:30 US Crude Oil Inventories. Estimate. 2.2M.
• 17:30 US FOMC Member Charles Plosser 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.