AUD/USD – Steady as Markets Await Key US data

AUD/USD continues to show little change, as it exhibits narrow range trading for the second straight day. Currently, the pair is trading in the 1.0550 range. The pair showed little reaction to remarks by Federal Reserve Chairman Bernard Bernanke, who did not give any hints as to when the current round of QE might end. After a quiet day on Monday, the US markets are in full swing today, with three key releases – Core Retail Sales, PPI, and Retail Sales. There is one Australian release on Tuesday, Consumer Sentiment.

Federal Reserve Chairman Bernard Bernanke spoke at the University of Michigan on Monday, and the markets were listening closely. Analysts were looking for any possible clues with regard to and end date for the Federal Reserve’s current Quantitative Easing program. The Fed has not set a deadline for the end of QE, but there has been speculation that the program could end sometime in 2013. This would have major ramifications for the US dollar, since QE is dollar-negative, so an early end to the program would be bullish for the greenback. However, Bernanke did little more than express his concern about the speed of the US recovery. He noted that the economy has shown signs of improvement, but he was still unsatisfied with the economy’s progress. Given these sentiments, it seems unlikely that the Fed will consider ending the current round of QE in 2013, barring a spectacular recovery by the US economy during the year.

Underscoring this point, the president of the San Francisco Federal Reserve Bank, John Williams, stated that he expected the Fed to continue its bond buying program “well into the second half of 2013.” Although Bernanke avoided talking about QE, he was more forthcoming with regard to the debt ceiling issue, which is likely to be a hot topic, if not a full-blown crisis, in February. The US is quickly approaching its debt limit of $16.4 trillion, and Bernanke said Congress must act and address the issue. He further noted that tinkering with interest rates will not make much difference, but that if Congress ensures that the country’s fiscal house is in order, interest rates would rise as the economy improves.

In economic news, the US Trade Deficit ballooned last month, hitting its highest levels since April. The sharp demand for imports signals that US consumers are purchasing more imported goods, which is good news for the global economy. At the same time, the US recovery is still having trouble getting on track, as the US continues to release mixed data. Unemployment figures have not looked good of late, and the staggering debt load will have to be dealt with by a divided Congress. The fiscal cliff has been averted for now, but the Republicans and Democrats will again have to work together in Congress and make decisions about spending cuts and the debt ceiling.

Looking at Tuesday’s releases, the markets will be watching Australian Consumer Sentiment. This important consumer indicator looked bad in December, slumping to a ten-month low. The markets will be hoping for a turnaround in the upcoming release. In the US, the markets will have plenty of numbers to chew on. There are three key releases – Core Retail Sales, PPI and Retail Sales. As well, the Empire State Manufacturing Index will be released. This important indicator plunged in December, but the forecast calls for a better reading in January.

AUD/USD for Tuesday, January 15, 2013

AUD/USD January 15 at 13:00 GMT

1.0537 H: 1.0543 L: 1.0528

AUD/USD Technical

AUD/USD continues to show little activity, as the pair appears comfortable in the mid-1.5 range. The proximate support and resistance lines (S1 and R1) remain intact, but either one could be tested if the pair can sustain any movement. On the downside, 1.0508, which is protecting the 1.05 line is the first line of support. This is followed by strong support at 1.0424. The line of 1.0568 is providing resistance, followed by 1.0605.

Current range: 1.0508 to 1.0568.

Further levels in both directions:
• Below: 1.0508, 1.0424, 1.0376, 1.0334, 1.0230 and 1.0174.
• Above: 1.0568, 1.0605, 1.0718, 1.0874 and 1.0961.

OANDA’s Open Position Ratios

The AUD/USD ratio is static, as the pair continues to show little movement. The short position component is the dominant one, but the long position component remains significant. A sign of movement in the ratio could signal some fluctuation by the pair, so traders should continue to monitor the ratio.

The Australian dollar was very busy last week, and managed to test the 1.06 line. However, the tone has changed, as the pair is showing subdued activity for a second straight day. With a host of US data on Tuesday, we could see the markets react to any unexpected numbers, and this could push the pair out of its listless trading.

AUD/USD Fundamentals

• 13:00 US FOMC Member Eric Rosengren Speaks.
• 13:30 US Core Retail Sales. Estimate 0.2%.
• 13:30 US PPI. Estimate -0.1%.
• 13:30 US Retail Sales. Estimate 0.2%.
• 13:30 US Core PPI. Estimate 0.2%.
• 13:30 US Empire State Manufacturing Index. Estimate 1.9 points.
• 15:00 US Business Inventories. Estimate 0.3%.
• 23:30 Australian Consumer Sentiment

*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.