AUD/USD – Edges Higher as RBA Holds Interest Rate at 3.0%

AUD/USD has moved higher in Tuesday trading, as the pair has climbed to the 1.0470 range in the European session. In a widely-aniticipated move, the Reserve Bank of Australia maintained the benchmark interest rate at an even 3.0%. Commodity Prices continue to look weak, as the indicator posted another decline. In the US, there was more disappointing economic news, as the ISM Manufacturing PMI dropped sharply. Today’s major release out of the US is Factory Orders.

The RBA had no surprises up its sleeve, as it held the key interest rate at the level of 3.0%. The RBA has now maintained this level since November 2012. In its Rate Statement, the central bank left the door open for further rates if needed, but gave no indication that such a step was being considered, as the statement was cautiously optimistic about the Australian economy. The RBA , and noted that previous interest cuts had been effective and had helped boost spending, although it again stated that the high value of the Australian dollar was weighing on the economy. 

US releases were a big disappointment last week, with poor data across a range of sectors, including housing and employment. The new week did not start well, as the ISM Manufacturing PMI dropped sharply from 54.2 points to 51.3 points, way below the estimate of 54.2 points. If this week continues in a downward trend, we could see a negative reaction from the markets, as concerns rise about the US recovery.

The markets are waiting as the Bank of Japan meets for a policy meeting on Thursday. This will be the first meeting under the helm of the new BOJ Governor, Haruhiko Kuroda. He has made no secret of his staunch support for further aggressive monetary easing, although he has been short on specifics. Last week, Kuroda revealed a few of his closely-held cards and stated that the BOJ will consider abolishing a rule which limits the amount of government bonds that the BOJ is permitted to purchase. Further, the central bank will discuss extending the maturity of such bonds from the current three years to five years. So we could see some important developments at this week’s meeting.

Over in Europe, the markets continue to cast a worried eye at Cyprus. The bailout agreement worth EUR13 billion may have been signed, but the drama and uncertainty in the small island country continue. Capital controls are still in place in Cyprus, as the government takes strict measures in order to head off a run on the banks by nervous deposit holders. Under the agreement, bank deposits under EUR100,000 will be left untouched, but there is confusion and uncertainty as to what will happen to larger accounts, which have been frozen. There is plenty of speculation about what will happen, with rumors that these accounts could get hit with huge taxes of up to 40%. As developments unfold, we could see some sharp reactions from the currency markets.

 

AUD/USD for Monday, April 2, 2013

Forex Rate Graph 21/1/13
 

AUD/USD April 2 at 12:15 GMT

1.0468  H: 1.0479 L: 1.0436

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
1.0230 1.0334 1.0424 1.0497 1.0568 1.0605

 

AUD/USD has posted modest gains in Tuesday trading. The pair is facing resistance just below the 1.05 level, at 1.0497. This line could be tested if the Australian dollar posts further gains. There is stronger resistance at 1.0568. On the downside, there is support at 1.0424. This is followed by a support level at 1.0334. 

Current range: 1.0424 to 1.0497

Further levels in both directions:

  • Below: 1.0424, 1.0334, 1.0230, 1.0174 and 1.0080
  • Above: 1.0497, 1.0568, 1.0605, 1.0697 and 1.0753

 

OANDA’s Open Position Ratios

The AUD/USD ratio remains close to an even split between long and short positions. This indicates that trader sentiment is closely divided, with no clear bias in either direction. If AUD/USD posts further gains, we can expect movement towards long positions in the ratio.

AUD/USD has posted limited gains after the RBA rate announcement. Will it be able to sustain the upward movement. With the release of Australian Trade Balance early on Wednesday, we could see more activity from the pair.

 

AUD/USD Fundamentals

  • 3:30 Australian Cash Rate
  • 3:30 Australian RBA Rate Statement
  • 5:30 Australian Commodity Prices. Actual -7.5%
  • 14:00 US Factory Orders. Estimate 3.1%
  • 14:00 US IBD/TIPP Economic Optimism. Estimate 46.1 points
  • All Day: US Total Vehicle Sales. Estimate 15.3M

 

*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.

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.