AUD/USD – Business Confidence Data helps Aussie Move Higher

The Australian dollar continues to move higher on Tuesday. The pair has climbed up to the 1.0490 level early in the North American session. The Aussie has had an excellent week so far, and has gained over a cent against the US dollar. The Australian currency was helped by an increase in the Business Confidence indicator, as well as a lower Chinese CPI figure. Australian Consumer Sentiment will be released early on Wednesday. In the US, there are two minor releases. NFIB Small Business Index missed its estimate, and Wholesale Inventories will be released later today.

The Australian dollar continues to push higher, and is close to the 1.05 line. The Aussie got some help from the NAB Business Confidence indicator, which climbed from 1 point to 2 points. This indicates that businesses are showing more confidence in the Australian economy, and there is an increase in the sentiment that economic conditions are improving. In China, CPI dropped sharply from 3.2% to 2.1%, and was lower than the estimate of 2.5%. The markets were pleased with the lower inflation figure as there was concern that China might implement some monetary tightening if inflation did not come down. The lower inflation figure has eased these concerns, and this has also helped the Australian currency.

Meanwhile, the Japanese yen continues to drop, and USD/JPY is within striking distance of the psychologically significant 100 level. We last saw this level in April 2009. The Bank of Japan has wasted no time in implementing further easing measures. The BOJ plans to double its asset purchase program by 2015, and  made good on its promise to purchase large amounts of government bonds. This move is aimed at pushing down longer-term interest rates in order to encourage businesses to borrow and spend more in order to increase activity in the economy and eliminate inflation, which has hobbled the Japanese economy for 15 years. The BOJ began its purchase of government bonds on Monday, and said it would purchase JPY 1 trillion in 5-10 year bonds, and an additional JPY200 billion in bonds with maturities exceeding 10 years.

In the US, talk of a deepening recovery is being replaced by concerns about the direction the economy, as the US continues to post out dismal numbers. With every major release over the past two weeks failing to meet expectations, the markets are justifiably becoming increasingly anxious. The data comes from sectors throughout the economy – housing, manufacturing consumer confidence and employment releases have all missed their estimates. On Friday, Non-Farm Payrolls followed the string of dismal releases, posting its worst showing since July 2012. There were 88 thousand new jobs created, way below the estimate of 198 thousand. Will we see a turnaround in this week’s numbers? If not, we could see some volatility in the currency markets.

AUD/USD for Tuesday, April 9, 2013

AUD/USD April 9 at 14:00 GMT

1.0474 H: 1.0494 L: 1.0414

AUD/USD Technical

AUD/USD continues to move higher in the Tuesday session. On the upside, the pair is facing resistance at 1.0508. This is a weak line, and could face pressure if the Aussie pushes above the 1.05 line. There is stronger resistance at 1.0568.On the downside, there is support at 1.0424. This line has strengthened as the pair trades close the 1.05 level. The next support level is at 1.0334.

Current range: 1.0424 to 1.0508.

Further levels in both directions:

• Below: 1.0424, 1.0334, 1.0230, 1.0174 and 1.0080
• Above: 1.0508, 1.0568, 1.0605 and 1.0697

OANDA’s Open Position Ratios

The AUD/USD ratio is pointing to movement towards short positions. This is not reflected in the pair’s current movement, as the Australian dollar continues to post gains. However, the movement in the ratio could point to an expectation for a correction from the pair’s current upward direction, and for the US dollar to recover some of its recent losses. The ratio is now close to an even split between long and short positions.

AUD/USD has taken advantage of solid Australian data and a reduction in Chinese inflation. Will this week’s upward momentum continue? We have not yet had any major US releases this week, so in the meantime, we could see AUD/USD remain at these high levels.

AUD/USD Fundamentals

• 1:30 Australian NAB Business Confidence. Actual 2 points.
• 11:30 US NFIB Small Business Index. Estimate 92.3points. Actual 89.5 points.
• 14:00 US Wholesale Inventories. Estimate 0.5%

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.