AUD/USD – Higher after Solid Australian Trade Balance

AUD/USD continues this week’s upward trend, as the Australian Trade Balance, a key indicator easily beat expectations. The Australian dollar was up on the news, as AUD/USD was trading in the high-1.04 range in Wednesday’s European session. Australian HIA New Home Sales did not look nearly as sharp, dropping to a six-month low. In the US, the markets will be hoping for some good news as two key events are released later today – ADP Non-Farm Employment Change and ISM Non-Manufacturing PMI.

The Aussie has had a good week, and continued to improve against its US counterpart as the Trade Balance deficit narrowed nicely in the March release. The indicator came in with a very small deficit of 0.18 billion dollars, its best showing since August 2012. This easily beat the estimate of a deficit of 1.00 billion. The Australian currency managed to shrug off weak housing data, as HIA New Home Sales declined sharply, falling 5.3%. This was the indicator’s first decline since October 2012. AIG Services Index will be released later on Wednesday.

US releases were a bust 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. The markets will be hoping for a turnaround on Wednesday, as the US releases key employment and PMI numbers.

The Cyprus bailout agreement may have been signed, but the drama continues and questions remain. Strict capital controls are still in place in Cyprus in order to prevent a run on the banks. Under the agreement, bank deposits below EUR1000,000 are safe, but larger accounts with the Bank of Cyprus will be facing a haircut of up to 60%. An amount of 37.5% of these deposits will be converted into bank shares, and up to 22.5% more could be grabbed in order to prop up the Bank of Cyprus’ reserves. This steep tax is expected to have a strong negative impact on the country’s business sector, and the government has admitted that the country is in recession. In order to help the ailing economy, the government plans to lift a ban on casinos and provide tax exemptions on business profits that are reinvested on the island. President Nicos Anastasiades has acknowledged that the bailout agreement is a bitter pill for Cypriots, but said that refusing the agreement would have meant the collapse of the banking sector and could have led to Cyprus’ exit from the Eurozone.

 

AUD/USD for Monday, April 3, 2013

Forex Rate Graph 21/1/13
 

AUD/USD April 3 at 11:30 GMT

1.0485 H: 1.0487 L: 1.0447

 

AUD/USD Technical

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

 

AUD/USD continues to edge higher, as the pair has climbed up to the 1.0480 range. The proximate resistance and support levels remain intact (R1 and S1 above). On the upside, 1.0497 is providing resistance. This is a weak line, and could be tested by the rising Aussie. This is followed by resistance at 1.0568, which has held firm since late January. The pair is receiving 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 is not showing any movement in Wednesday trading. This is not reflected in the current movement of the pair, as the Australian dollar has been posting modest gains against the US currency. The ratio is closely split between long and short positions. This indicates that trader sentiment is divided as to what direction we will see from the pair.

The Aussie continues to make inroads against the US dollar, as the 1.05 level is now in sight. Will the upward momentum continue? The US releases some key numbers later today, and the BOJ begins an important policy meeting on Thursday. So we could see further activity from the pair as the week progresses.

 

AUD/USD Fundamentals

  • 00:00 Australian HIA New Home Sales. Actual -5.3%
  • 00:30 Australian Trade Balance. Estimate -1.00B. Actual -0.18B
  • 12:15 US ADP Non-Farm Employment Change. Estimate 203K
  • 14:00 US ISM Non-Manufacturing PMI. Estimate 55.9 points
  • 14:30 US Crude Oil Inventories. Estimate 1.8M
  • 21:00 US FOMC Member James Bullard Speaks

 

*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.