AUD/USD – Soft Australian CPI Disappoints Markets

AUD/USD is steady in Wednesday trading, despite weak inflation numbers out of Australia earlier in the day. AUD/USD was trading in the high-1.02 range in the European session. In the US, today’s highlight is Core Durable Goods Orders.

The Aussie has managed to shrug off a weak CPI release. The key inflation index rose slightly to 0.4%, but failed to reach the estimate of 0.7%. Trimmed Mean CPI, which excludes volatile items, fared even worse. The index fell from 0.6% to 0.3%, and missed the forecast of 0.5%. The weak numbers come on the heels of weak Chinese manufacturing data, and the Australian dollar may have trouble trying to dodge all these poor releases and hold its own against the US dollar.

Over in the US, we’ve been treated to a long and unwanted streak of weak key releases. There wasn’t any good news from Existing Home Sales, which came in at 492 million, well off the estimate of 5.02 million. However, New Home Sales cheered up the markets with a solid release on Wednesday. The indicator climbed from 411 thousand to 417 thousand, edging past the estimate of 416 thousand. The markets will be hoping that the good news continues on Wednesday, with the release of key manufacturing data.

There was little surprise that the G20 did not take Japan to task over its monetary policies, which have resulted in the yen taking a tumble. G20 final statements tend not to criticize its members, and this meeting was no exception. Although there has been a lot of criticism leveled against Japan, the G20 issued a very soft statement about currency devaluation which made no mention Japan, giving it a green light to continue its aggressive easing measures. Finance Minister Taro Aso has insisted that the measures are aimed at stamping out deflation, and the yen’s plunge is a “byproduct”. With the BOJ moving full steam ahead in its fight against deflation, traders can expect the Japanese currency to continue to weaken. This does not bode well for Australia, whose exports will have to compete with a shrinking yen, which has lost close to 20% of its value in the past 6 months.

 

 AUD/USD for Monday, April 24, 2013

Forex Rate Graph 21/1/13
 

AUD/USD April 24 at 11:40 GMT

1.0276 H: 1.0295 L: 1.0232

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
1.0100 1.0174 1.0230 1.0298 1.0350 1.0424

 

AUD/USD is trading quietly, as the proximate support and resistance levels remain in place (R1 and S1 above). On the upside, the pair faces resistance at 1.0298. This line is weak, and could see activity during the day. There is stronger resistance at 1.0350. The pair is receiving support at 1.0230. This is followed by a support level at 1.0174. This line has held firm since early March.

Current range: 1.0230 to 1.0298

Further levels in both directions:

  • Below: 1.0230, 1.0174, 1.01 and 1.008
  • Above: 1.0298, 1.0350, 1.0424, 1.0508 and 1.0568

 

OANDA’s Open Position Ratios

The AUD/USD ratio is almost unchanged in Wednesday trading. This is consistent with the lack of movement we are currently seeing from the pair. Traders should keep a close eye on the ratio, as an increase in activity could be an early indication of a break out by AUD/USD from its narrow range.

The Aussie has managed to hold its own against the US this week, shrugging off weak Chinese data and a disappointing Australian CPI. With the US releasing key manufacturing data later in the day, we could see some movement from the pair, if the reading is not in line with market expectations.

 

AUD/USD Fundamentals

  • 1:30 Australian CPI. Estimate 0.7%. Actual 0.4%
  • 1:30 Australian Trimmed CPI. Estimate 0.5%. Actual 0.8%
  • 3:30 Reserve Bank of Australia Deputy Governor Philip Lowe Speaks
  • 12:30 US Core Durable Goods Orders. Estimate 0.5%
  • 12:30 US Durable Goods Orders. Estimate -2.9%
  • 13:30 US Treasury Secretary Jack Lew Speaks
  • 14:30 US Crude Oil Inventories. Estimate 1.8M

 

*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.