AUD/USD – Higher as US GDP Misses Expectations

AUD/USD has started the new trading week with gains. The pair barreled past the 1.03 line, and was trading in the mid-1.03 range early in the North American session. The Australian dollar has taken advantage of disappointing US GDP on Friday. In economic news, the US will try to get on track as it releases Pending New Home Sales. There are no Australian releases on Monday.

As the major central banks look to increase their easing measures, we could see the Aussie post more gains against its US counterpart. This is most apparent in the aggressive policies of the Bank of Japan, but is also reflective of the Federal Reserve, the Bank of England, and to some extent, the ECB. This makes the Aussie quite attractive, with interest rates in Australia at 3.0%. As one analyst succinctly noted regarding the central banks’ easing bias- “money needs to go somewhere”.

In the Eurozone, there is growing speculation that the ECB could press the trigger and lower rates. The Eurozone continues to stagnate with poor releases, and has its hands full with crises in Cyprus (bailout fiasco) and Italy (political gridlock). Speculation that the ECB will take action is growing in the markets. Goldman Sachs released a statement on Thursday, stating that it expects a 0.25% cut when the ECB meets next week. The prestigious firm also downgraded Eurozone growth for 2013, from -0.5% to -0.7%. The ECB will set rates next Thursday, but the possibility of a rate cut will likely to preoccupy the markets during the course of the week.

The US has been having its share of problems as well. Since late March, almost all key releases have pointed downwards, indicating weakness in a wide range of economic sectors. This was underscored on Friday, as US GDP rose to 2.5%, but still disappointed the markets, which had expected a 3.1% increase. The GDP release may serve as a wakeup call that the US economy has hit some turbulence, and this could impact on the US dollar.

 

AUD/USD for Monday, April 29, 2013

Forex Rate Graph 21/1/13
 

AUD/USD April 29 at 12:40 GMT

1.0344 H: 1.0352 L: 1.0275

 

AUD/USD Technical

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

 

AUD/USD has flexed some muscle in Monday trading. The pair is testing the 1.0350 line, and we could see it fall in the Aussie  continues to push higher. There is stronger resistance at 1.0424. On the downside, the pair is now receiving support at 1.0298. This is followed by a support level at 1.0230. This line has strengthened as the pair trades at higher levels.

Current range: 1.0298 to 1.0350

Further levels in both directions:

  • Below: 1.0298, 1.0230, 1.0174, 1.0080 and 1.00.
  • Above: 1.0350, 1.0424, 1.0508 and 1.0568

 

OANDA’s Open Position Ratios

The AUD/USD ratio is showing movement towards short positions. We are not seeing this in the pair, as the Aussie has started the week with strong gains against the US dollar. However, the activity in the ratio could be a sign that we will see a correction and the US dollar will rebound after starting the week with losses.

The Australian dollar has looked sharp in the Monday session. With the US releasing key housing data later today, we could see more movement from the pair during the day.

 

AUD/USD Fundamentals

  • 12:30 US Core PCE Price Index. Estimate 0.1%.
  • 12:30 US Personal Spending. Estimate 0.2%.
  • 12:30 US Personal Income. Estimate 0.4%.
  • 14:00 US Pending Home Sales. Estimate 1.1%.

 

*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.