AUD/USD – Steady Ahead of BOJ Policy Meeting

AUD/USD is steady in Monday trading, as the markets focus on Japan, where the Bank of Japan meets for an important policy meeting on Tuesday. The pair was trading around the 1.0520 range. AUD/USD did not react to Friday’s releases, which pointed to weak US consumer sentiment and strong Chinese GDP numbers. The US markets are closed for Martin Luther King Day, and there are no releases out of Australia on Monday.

AUD/USD has not shown much activity since Friday, although there were two key economic releases at the end of the week. In the US, the markets were disappointed with weak consumer confidence numbers, as Preliminary UoM Consumer Sentiment posted its worst performance since last January. The indicator dropped to 71.3 points, well below the forecast of 75.1 points. Consumer spending and confidence is a critical component of economic growth, and these numbers will have to improve significantly if the US recovery is to gain traction. On the bright side, China released its GDP data, and Q4 of 2012 looked very sharp. Chinese GDP jumped to 7.9% from 7.4% in Q3, and at the same time beat the estimate of 7.8%. This is welcome news for Australia, as China is the country’s number one trading partner. AUD/USD has not responded with much movement, although the pair has tested the 1.05 line.

The markets are eagerly awaiting a key Bank of Japan policy meeting on Tuesday. The BOJ will be huddled for two days, and the outcome could have a major impact on USD/JPY, which has been flirting with the 90 level. The central bank is widely expected to take additional easing steps, and to double its inflation target to 2%. This would bring it in line with the government’s inflation stance. Prime Minister Shinzo wants to kick-start the sluggish Japanese economy, and has targeted deflation, which has been a long-term problem. He has put strong pressure on the BOJ to fall into line with the government’s aggressive economic platform, and is expected to appoint a new BOJ governor who can be counted on to comply with the government’s agenda.

Australia’s vital export sector has been hit hard by the global slowdown, and there was more bad news about the global economy, this time from the World Bank. In a recent report, the World Bank downgraded its forecast for global growth. In its Global Economic Prospects report, which is issued twice a year, the prestigious institution said that global growth in 2013 would be 2.4%. This was down from the 3.0% estimate the World Bank stated in its June 2012 report. The World Bank noted persistent weaknesses in the economies of developed nations, citing austerity measures, high unemployment and weak business confidence. The report also sounded the alarm over the damage in market confidence due the ongoing fiscal battles in the US, and urged a quick resolution of the issue so as to ensure market stability.

 

AUD/USD for Monday, January 21, 2013

Forex Rate Graph 21/1/13

 

AUD/USD January 21 at 12:30 GMT

1.0518  H: 1.0526  L: 1.0493

 

AUD/USD Technical

 

S3 S2 S1 R1 R2 R3
1.0376 1.0424 1.0508 1.0568 1.0605 1.0718

 

AUD/USD has remained steady, with the pair trading around the 1.0520 level. The 1.05 line has seen some activity, but the pair has been unable to sustain any moves. The line of 1.0508 is a weak line, but continues to provide support. It could face further pressure if the pair retreats back towards the 1.05 line. This is followed by strong support at 1.0424. On the upside, 1.0568 is providing resistance. It has strengthened as the pair trades close the the 1.05 level.

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 remains quiet, with little movement as we start the new trading week. Trader sentiment continues to be split, with the short postions enjoying a slight edge over long positions. Activity in the ratio could be a sign of movement by the pair, which is trading without fanfare in the 1.0520 range.

AUD/USD has not shown much interest in weak US consumer data and strong Chinese growth. Will this change following a critical Bank of Japan meeeting on Tuesday? With no economic releases out of either the US or Australia, Monday could be a quiet day, with little movement from the pair.

 

AUD/USD Fundamentals

  • There are no scheduled releases out of Australia or the US on Monday.

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.

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Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.