AUD / USD – Week Starts With More Narrow Range Trading

AUD/USD is trading quietly as we begin the new trading week. The pair has picked up where it left off on Friday, as it trades in the low-1.02 range.

Although there have not been any releases out of Australia since Thursday, there were a host of Chinese numbers on the weekend, and the news was mostly bad. Chinese releases should be treated as market-movers for the Australian dollar, as  the Asian giant is Australia’s number one trading partner. Chinese CPI came in at 3.2%, slightly above the estimate of 3.0%.  Industrial Production fell to 9.3%, well below the estimate of 10.4%.  The news was no better from Retail Sales, which posted its worst showing in over six years. The indicator gained 12.2%, but this was way off the forecast of a 14.5% gain. Chinese New Loans was down sharply, coming in at 620 billion. This was well below the forecast of 750 billion. These weak numbers have raised concerns that China may be experiencing a slowdown, which could have a strong negative impact on the shaky Australian economy.

US employment numbers looked excellent last week, raising hopes that the US recovery is gaining traction. Unemployment Claims dropped to 340K, well below the estimate of 354K. Non-Farm Employment Claims hit 236 thousand, easily exceeding the forecast of 162 thousand. The Unemployment rate fell, dropping to 7.7% from 7.9%. The strong figures helped the dollar post sharp gains against the euro at the end of the week, and we could see the greenback make further gains if US number numbers continue to look sharp. The strong data has raised speculation that the Fed might wind up its current round of QE, which involves the purchase of $85 billion in assets each month. Previously, the Fed has said that the open-ended asset purchases would continue until unemployment fell to 6.5%. However, if the economy continues to show signs of improvement, the Fed will face pressure to wind up or at least modify the current asset purchase program. 

The markets also continue to monitor developments in Japan, as the yen continues to drop in value. The Bank of Japan maintained interest rates and QE levels at a policy meeting last week. The benchmark rate remained at 0%-0.10%, while the size of the central bank’s asset purchase remained unchanged at JPY76 trillion. This policy meeting was the final one presided by governor Masaaki Shirakawa, who will be replaced by incoming governor Haruhiko Kuroda. The new governor is a proponent of strong monetary measures to kick-start the economy, and has suggested that the central bank consider purchasing more Japanese government bonds. Some analysts feel that this could cause a market bubble, with one expert warning that the BOJ’s options are limited, and that Kuroda will face a “wall of reality” when he takes the helm of the BOJ later this month. Regarding inflation, Kuroda said that the BOJ’s current policies were not strong enough to boost inflation to the government’s target of 2%. Kuroda suggested that the BOJ consider commencing its open-ended asset purchases before the scheduled start of 2014. He took pains to note that the BOJ is not targeting the yen, which has lost 12% of its value against the US dollar in the past 3 months, much to the dismay and unease of Japan’s trading partners.

AUD/USD for Monday, March 11, 2013

AUD/USD March 11 at 12:55 GMT

1.0228 H: 1.0238 L: 1.0211

AUD/USD Technical

AUD/USD continues to be marked by narrow range trading in the Monday session. The pair is testing resistance at 1.0230. This line has already been breached today, and could face further activity. There is stronger resistance at 1.03334. On the downside, 1.0174 is providing support. This is followed by the support level of 1.0080, which is protecting the all-important parity level.

Current range: 1.0174 to 1.0230

Further levels in both directions:

• Below: 1.0174, 1.0080, 1.00, 0.9948 and 0.9858
• Above: 1.0230, 1.0334, 1.0424, 1.0568 and 1.0605

OANDA’s Open Position Ratios

The AUD/USD ratio is pointing to movement towards long positions, as we commence the new trading week. We are not seeing this activity in the current movement of the pair, as AUD/USD is rangebound. At the same time, the open long positions enjoy a commanding majority in the ratio, indicating that trader sentiment remains strongly biased towards the Australian dollar making gains against the US currency.

AUD/USD continues to trade quietly in the low-1.02 range. With no releases on Monday from either the US or Australia, the pair could continue to drift quietly.

AUD/USD Fundamentals

• There are no scheduled releases from the US or Australia on Monday 

*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.