AUD/USD – Edges Lower as Aussie Remains Under Pressure

AUD/USD has edged lower in Wednesday trading, as the pair trades in the mid-1.03 range in the European session. The pair has had a rough week, after Monday’s plunge. In economic news, Australian MI Leading Index was up nicely, gaining 0.6%. In the US, the long streak of weak data continued, as Building Permits and Core CPI both failed to meet their estimates.

The Australian dollar looked razor-sharp last week, climbing close to the 1.06 line. This week is a different story, as AUD/USD dropped close to two cents early in the week. There were two fundamental events which helped contribute to this sharp drop. The first was weak Chinese GDP data. The key indicator dropped from 7.9% to 7.7%, and missed the estimate of an 8.0% gain. As China is Australia’s most important market, a slowdown in the Chinese economy spells bad news for the Aussie. Second, the RBA left the door open for further interest cuts at its last policy meeting, and lower rates means the Australian currency is less attractive to foreign investors. Meanwhile, continuing weak US data is weighing on the Aussie, as nervous investors look for shelter with the safe-haven US dollar.

In the US, the picture is not a pretty one, as a long streak of weak economic numbers, dating back to March, continues. Building Permits dropped from 0.95 million to 0.90 million, missing the forecast of 0.94 million. Core CPI posted a weak gain of 0.1%, falling below the estimate of 0.2%. There was better news from US Housing Starts, which hit a multi-year high, improving to 1.04 million. The estimate stood at 0.93 million. The weak data points to trouble in the US economy, and if the streak continues, is bound to raise red flags in the markets about the extent of the US recovery.

The Cyprus bailout crisis, which rattled markets worldwide, may not be in the headlines lately, but the crisis is by no means behind us. Last month, the EU and IMF agreed to provide EUR 10 billion, with Cyprus kicking in another EUR 7 billion. However, the original deal collapsed after Cyprus balked at taxing every bank deposit in the country, following a huge outcry on the island. The bailout has now ballooned to EUR 23 billion, with Cyprus agreeing to pay EUR 13 billion. The country plans to raise these funds through a combination of taxes on uninsured depositors, tax hikes and spending cuts. Cyprus president Nicos Anastasiades said he will ask the EU for more help, but it not clear if Cyprus is asking additional bailout funds or funds in another form. The bailout agreement calls for huge taxes on deposits over EUR 100,000. Deposits in the Bank of Cyprus will lose between 37.5% and 60%, while those in Laiki Bank, which will be winded down, could lose up to 80%. Under the bailout agreement, Cyprus must restructure its banking sector and impose austerity measures. Analysts estimate that the country’s GDP will be slashed by 13% in 2013 and 2014, and steering the economy through choppy waters promises to be a serious challenge to the Cypriot government.

 

AUD/USD for Wednesday, April 17, 2013

Forex Rate Graph 21/1/13
 

AUD/USD April 17 at 11:00 GMT

1.0349 H: 1.0388 L: 1.0340

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
1.0174 1.0230 1.0298 1.0350 1.0424 1.0508

 

AUD/USD has edged lower in the Wednesday session. On the upside, the pair is testing the 1.0350 level, and we could see this line fall. There is stronger resistance at 1.0424. On the downside, there is support at 1.0298. This is followed by a support level at 1.0230.

Current range: 1.0298 to 1.0350

Further levels in both directions:

  • Below: 1.0298, 1.0230 and 1.0174 and 1.01
  • Above: 1.0350, 1.0424, 1.0508, 1.0568, 1.0605

 

OANDA’s Open Position Ratios

The AUD/USD ratio is pointing to movement towards short positions. This is consistent with the current movement of the pair, as the Aussie has edged lower. Long positions continue to comprise a solid majority of open positions, indicating that trader sentiment remains strongly biased in favor of the US dollar posting more gains against the Australian currency.

AUD/USD is trading in the mid-1.03 range. Wednesday is fairly quiet in terms of releases, so we can expect the pair to trade quietly.

 

AUD/USD Fundamentals

  • 00:30 Australian MI Leading Index. Actual 0.6%
  • 9:33: German 10-year Bond Auction. Actual 1.28%.
  • 13:30 US FOMC Member James Bullard Speaks
  • 14:30 US Crude Oil Inventories. Estimate 1.2M
  • 16:00 US FOMC Member Eric Rosengren Speaks
  • 18:00 US Beige Book
  • 20:00 US Treasury Secretary Jack Lew 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.