AUD/USD – Aussie Struggling Ahead of Fed Announcement

AUD/USD remains under pressure ahead of the Federal Reserve Statement later on Wednesday. The pair has lost ground in Wednesday’s European session, and was trading in the 1.0430 range. In the US, a key consumer confidence reading slumped badly on Tuesday. The markets will be hoping for better news today, with three key scheduled releases - ADP Non-farm Employment Change, Advance GDP and the FOMC Statement. There are no Australian releases on Wednesday.

The markets will be closely monitoring Wednesday’s Federal Reserve Statement, as the Fed wraps up an important two-day policy meeting.  The Fed continues to do its best to bolster the bumpy recovery, and increased its purchases of securities in January from $40 billion to $85 billion. This has pushed the Fed’s balance sheet to a record $3 trillion. Despite these measures, the US recovery remains slow, and unemployment is still high at 7.8%. Minutes from the most recent FOMC pointed to members being divided between those in favor of ending QE in mid-2013, versus those who wish to continue it to a later date. When the Fed implemented the most recent round of QE, it stated that it would continue until unemployment fell to 6.5%. Most analysts are predicting that the Fed will reaffirm this stance at the conclusion of today’s meeting.

US economic indicators continue to point in all directions, much to the consternation of the markets. Recent employment and retail sales numbers have been very positive, but this has been offset by weak housing and manufacturing data. Consumer confidence is also on the wane, as underscored by Tuesday’s CB Consumer Confidence release. The key indicator dropped sharply to 58.6 points, its worst showing in over a year. The markets had expected a much higher reading of 64.8 points.  We may get a better idea of the health of the US economy with the release of GDP on Wednesday. The markets are bracing for a relatively weak reading, with an estimate of a 1.1% gain. Australia posted mixed data on Tuesday, as Business Confidence surged. However, the CB Leading Index looked weak, as the index posted a decline of 0.2%.This important indicator has recorded only one gain since August. Australia will release a host of important indicators on Thursday, including New Home Sales.

 

AUD/USD for Wednesday, January 30, 2013

Forex Rate Graph 21/1/13

AUD/USD January 30 at 11:20 GMT

1.0427 H: 1.0475 L: 1.0426

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
1.0334 1.0376 1.0424 1.0473 1.0568 1.0605

 

AUD/USD is weakening, as the pair drops closer to the 1.04 level. The pair is testing the 1.0424 support level, and this line remains fluid. There is stronger support at 1.0376. On the upside, 1.0473 is the next line of resistance. This line could face activity if the Australian dollar can reverse the current downward move. This is followed by strong resistance at 1.0568.

Current range: 1.0473 to 1.0568.

Further levels in both directions:

  • Below:1.0473, 1.0424, 1.0376, 1.0334, 1.0230 and 1.0174 and 1.0031.
  • Above: 1.0568, 1.0605, 1.0718, 1.0874 and 1.0961.

 

OANDA’s Open Position Ratios

The AUD/USD ratio is not showing much activity. This is not reflected in the currency pair, as the Aussie has lost some ground to the greenback.Trader sentiment continues to be split, with the short postions enjoying a slight edge. We can expect the ratio to show activity if AUD/USD continues to fluctuate.

AUD/USD remains under pressure ahead of the FOMC Statement. We could see more movement from the pair, depending on the market’s reaction to the Federal Reserve announcment. As well, any unexpected readings from Wednesday’s key US releases could affect the direction of USD/AUD.

 

AUD/USD Fundamentals

  • 13:15 US ADP Non-Farm Employment Change. Estimate 164K.
  • 13:30 US Advance GDP. Estimate 1.1%.
  • 13:30 US Advance GDP Price Index. Estimate. 1.5%.
  • 15:30 US Crude Oil Inventories. Estimate 2.9M.
  • 18:00 German Deutsche Bundesbank President Jens Weidmann Speaks.
  • 19:15 US FOMC Statement.
  • 19:15 US Federal Funds Rate. Estimate <0.25%.

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.