AUD/USD – Steady As Budget Crisis Deepens in US

AUD/USD is starting the new trading week quietly, as the pair trades in the low-0.93 range in Monday’s European session. In economic news, Australian Private Sector Credit was within expectations. There is just one US release today, Chicago PMI. The markets are expecting the index to rise in the August release.

After an impressive rally earlier this month, which saw AUD/USD improve by almost six cents, the Aussie has run into some turbulence. The currency has coughed up close to two cents in little over a week, and is struggling to remain above the 0.93 line. The RBA is carefully monitoring interest rates, and could reduce them further in order to help the economy. As well, the RBA has stated more than once that it does not view a strong Australian dollar as positive for the economy. These sentiments from the RBA are likely to continue to weigh on the Australian currency.

It’s crunch time in Washington, as the US government will find itself without funds to operate if Congress fails to break the budget impasse on September 30, the last day of the current financial year. If that happens, non-essential government services would be forced to shut down. This last happened in 1996, and politicians on both sides of the divide will be trying to hammer out an agreement so that the government can keep operating. Both sides seem entrenched in their positions. Republicans want to defund Obamacare before they approve a budget, and the Democrats are determined to protect their health care bill. This crisis, which would likely affect the currency markets, could be a dress rehearsal for a much more serious crisis, which will occur in two weeks if Congress doesn’t raise the debt ceiling.

AUD/USD for Monday, September 30, 2013

AUD/USD 0.9322 H: 0.9337 L: 0.9281

AUD/USD Technical

• AUD/USD is very quiet in Monday trading. The pair dipped below the 0.93 line in the Asian session but then recovered.
• The pair is testing resistance at 0.9328. This line could fall if the Australian dollar shows any upward movement. This is followed by stronger resistance at 0.9400.
• On the downside, the pair is receiving strong support at 0.9221. Next, there is a support level at 0.9135, which has remained intact since early September.
• Current range: 0.9221 to 0.9328

Further levels in both directions:

• Below: 0.9221, 0.9135, 0.9089 and 0.9000
• Above: 0.9328, 0.9400, 0.9508, 0.9613 and 0.9700

OANDA’s Open Positions Ratio

AUD/USD ratio continues to point to long positions in Monday trading. This is not currently reflective of the pair’s movement, which is showing little activity.

After excellent gains this month, the AUD/USD rally hit a wall last week. Will the downward trend continue? The US budget crisis could cause some volatility in the pair, as investors make run for the safe-haven US dollar if the crisis is not resolved.

AUD/USD Fundamentals

• 00:30 Australian MI Inflation Gauge. Estimate 0.2%.
• 1:30 Australian Private Sector Credit. Estimate 0.4%. Actual 0.3%.
• 13:45 US Chicago PMI. Estimate 54.5 points.

*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.