AUD/USD – Aussie Climbs After BOJ Announcement

AUD/USD has gained ground in Tuesday trading, as it received a lift from news out of Japan. The Bank of Japan met for an important policy meeting on Tuesday, and announced that it was doubling its inflation target to 2%. The BOJ also announced other easing steps. The Aussie jumped on the news, and AUD/USD was trading at the 1.570 level. There are no economic releases out of Australia on Tuesday. In the US, today’s key release is Existing Home Sales.

AUD/USD has a quiet start to the week, but that all changed on Tuesday, as the Australian dollar has posted strong gains against its US counterpart. The pair responded positively to announcements by the Bank of Japan at a closely-watched policy meeting. As expected, the BOJ changed its inflation stance, increasing its inflation target from 1% to 2%. This is in line with the Japanese government’s target. Prime Minister Abe has been vocal about combating deflation, and has been putting strong pressure on the BOJ to change its inflation target. The central bank also announced an open-ended commitment to buy assets under its asset-buying and lending scheme. However, the program will not begin until January 2014. As expected, the BOJ maintained its benchmark interest at >0.10%. The markets are hoping that these steps will kick-start the anemic Japanese economy. Japan is an important trade partner for Australia, so positive market sentiment has given a boost to the Australian dollar.

In the US, the markets are back in action after a long weekend. The markets will be watching today’s Existing Home Sales release. This key housing indicator has been on the upswing in recent months, and the forecast calls for further improvement. The other US release is the Richmond Manufacturing Index. After two disappointing manufacturing releases last week, another poor reading could raise alarm bells about the health of the US manufacturing sector.

In Washington, there was a new development in budget negotiations, which have been stalled due to sharp disagreements between the Republicans and Democrats. The Republicans have announced that they will table a proposal in Congress which would extend the debt ceiling until April 15. This would allow the U.S. government to borrow enough money to keep it fully operating for the next three months until the sides can reach an agreement. However, the sides are far apart on the issue of spending cuts, so we can expect more fireworks on Capitol Hill before the spring thaw.

 

 

AUD/USD for Tuesday, January 22, 2013

Forex Rate Graph 22/1/13

AUD/USD January 22 at 13:50 GMT

1.0571 H: 1.0578 L: 1.0505

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
1.0424 1.0508 1.0568 1.0605 1.0718 1.0874

 

AUD/USD broke out with a bang, climbing sharply after the BOJ announcement. The pair has pushed up to the 1.0570 level. There is weak resistance at 1.0568, and this line could face further pressure from the pair. 1.0508 is the next support level. This line has strengthened as the AUD trades at higher levels. On the upside, there is resistance at 1.0605. This is a significant line, and was last tested in September 2012.

Current range: 1.0568 to 1.0605.

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 showing movement, with activity towards short positions. This movement has been reflected in the pair, which has had a busy day. Trader sentiment is close to a split, with the short postions enjoying a slight edge in ratio. Look for the ratio to continue to be active as AUD/USD continues to fluctuate.

AUD/USD shrugged off recent weak US consumer data and strong Chinese growth numbers, but that changed in a hurry following a critical Bank of Japan meeeting earlier on Tuesday. The Aussie is sharply higher, and the all-important 1.06 line is not too far away. We could see AUD/USD take advantage of its present momentum and continue to push higher against the greenback.

 

AUD/USD Fundamentals

  • 15:00 US Existing Home Sales. Estimate 5.09M
  • 15:00 US Richmond Manufacturing Index. Estimate 4 points.

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.

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.