AUD/USD – Australian CPI Data Disappoints

Australia released key inflation data earlier on Wednesday, and the news disappointed the markets. Australian CPI fell sharply, and the Aussie responded by losing ground, before recovering. AUD/USD was trading in the 1.0560 range. In the US, economic data was weak on Tuesday. Existing Home Sales came in well below the market forecast, and the Richmond Manufacturing Index dropped to a six-month low.

The Australian Consumer Price Index (CPI), which is released each quarter, posted a sharp drop, as it gained only 0.2% in Q4. This was in marked contrast to the robust 1.4% gain recorded in Q3 of 2012. The key consumer inflation index failed to meet the market estimate of 0.4%. The marked decrease in inflation is a worrying signal about the extent of activity in the Australian economy. The markets will be eagerly awaiting the release of the Chinese Manufacturing PMI on Thursday. This PMI has been steadily improving in recent months, and the markets will hope that this positive trend continues. Trimmed CPI showed little change, posting a 0.6% gain. This was a notch below the estimate of a 0.7% gain. This indicator excludes the most volatile 30% of items which comprise CPI. Overshadowed by the CPI data was the release of the MI Leading Index. This composite index is considered a minor release, since much of the data has been released previously. The indicator looked sharp, climbing to 0.6%, after a negligible 0.1% rise in the previous release.

In the US, Existing Housing Sales disappointed the markets. The key housing indicator slipped to 4.94 million, which was well below the estimate of 5.09M. There was more bad news from the manufacturing sector, as the Richmond Manufacturing Index plunged 12 points, its worst showing since July 2012. The markets had anticipated a rise of 4 points. This release was the third dismal manufacturing reading in January, and underscores that the US manufacturing sector is experiencing ongoing contraction.

The fiscal cliff has taken a short time out, but Congress is getting ready to resume battle over the next round of 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. The recent fiscal cliff agreement postponed the hot issues of spending cuts and the huge US debt, but another fiscal deadline is not far away. On March 1, steep spending cuts to defense and domestic programs are scheduled to take place. After a short period of calm, we can expect more fireworks on Capitol Hill.

 

AUD/USD for Wenesday, January 23, 2013

Forex Rate Graph 21/1/13

AUD/USD January 23 at 11:45 GMT

1.0555 H: 1.0568 L: 1.0528

 

AUD/USD Technical

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

 

AUD/USD moves have been limited, as the proximate support and resistance lines (S1 and R1 above) remain in place.There is support at 1.0508. It held firm as the pair lost some ground in the Asian session. This is followed by strong support at 1.0424. On the upside, 1.0568 is the next line of resistance. It was tested earlier on Wednesday, and could see further activity from the pair.

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  showing strong movement towards long positions. This could be an indication that the Aussie will gain some upward momentum against the US dollar. Long postions now comprise the majority of the ratio, underscoring trader sentiment in favor of AUD/USD rising higher.

AUD/USD shrugged off some unflattering CPI numbers, as it trades in the mid-1.05 range. We could some movement following key Chinese manufacturing data on Thursday. In the meantime, we can expect subdued movement from the pair.

 

AUD/USD Fundamentals

  • 00:30 Australian CPI. Estimate 0.4%. Actual 0.2%.
  • 00:30 Australian Trimmed Mean CPI. Estimate 0.6%. Actual 0.7%.
  • 14:00 US HPI. Estimate 0.7%.

 

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.