AUD/USD – Down and Under as Sharp Slide Continues

The Australian dollar continues to slide against the US currency, as the pair briefly dipped below the 0.98 line in Thursday trading. The Aussie has had a miserable May, shedding over five cents since the start of the month. Australian New Motor Vehicle Sales looked weak, posting another decline. In the US, we can expect a busy day, with four key releases on Thursday – as Eurozone inflation numbers matched the forecast. In the US, it’s a very busy day with four key releases – Building Permits, Core CPI, Unemployment Claims and the Philly Fed Manufacturing Index. There are no Australian releases on Thursday.

The slumping Australian dollar got no help from a bleak Australian budget, which was released earlier this week. The government, which faces elections later this year, shied away from unpopular spending cuts but also was forced to revise an earlier forecast of a surplus. In October, the government stated that it would post a modest surplus of A$2.2 billion for 2013/2014, but was forced to revise this to a record deficit of A$19.4 billion. The government blamed the high Australian dollar and weak commodity prices for a dramatic loss in revenue. Meanwhile, both the Standard & Poor’s and Moody rating agencies maintained Australia’s AAA rating, despite the bleak budget. On Wednesday, New Motor Vehicle Sales, an important consumer spending indicator, declined 1.6%, its worst showing since February.

The beleaguered Aussie has been taking it on the chin from all corners. New Motor Vehicle Sales looked weak, and the budget release indicates that Australia will post a record deficit. The RBA has also contributed to the currency’s free-fall. The recent interest rate cut, which surprised the markets, hurt the Australian dollar. The central bank added more fuel to the fire on Friday, when it forecast in its Monetary Policy Statement that it expected “subdued” growth from the economy.

The US dollar has shown some broad strength against the major currencies, in part due to speculation that the Federal Reserve might terminate its current round of quantitative easing, thanks to an improving employment picture in the US. The Fed has not given any clues that it might scale back QE, which involves asset purchases of $85 billion every month. However, if the US recovery shows stronger signs of recovery, pressure will increase on the Fed to ease up on the QE, which would be dollar-positive. Any statements from the Fed regarding QE could affect AUD/USD.

 

AUD/USD for Thursday, May 16, 2013

Forex Rate Graph 21/1/13
 

AUD/USD May 16 at 13:25 GMT

AUD/USD 98.14 H: 98.22 L: 97.98

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9541 0.9627 0.9795 99.07 1.00 1.0080

 

AUD/USD continues to lose ground, and is struggling to stay in o.98 territory. The pair at 0.9907. This line has strengthened as the pair trades at lower levels. The next resistance line is at the all-important parity line. On the downside, the pair is testing support at 0.9795. This line could fall if the pair’s downward trend continues. The next support level is at 0.9627.

  • Current range: 0.9795 to 0.9907

 

Further levels in both directions:

  • Below:  0.9795, 0.9627, 0.9541 and 0.9405 
  • Above: 0.9907,  1.00, 1.0080, 1.01 and 1.0174

 

OANDA’s Open Positions Ratio

AUD/USD ratio is not showing much movement in the Thursday session. This is not reflected in the pair’s current movement, as AUD/USD continues to lose ground. If the pair continues to show strong movement, we can expect the ratio to show activity as well.

The Aussie continues to fall, and is struggling to stay above the 0.98 line. We can expect the action to continue, as the US releases a host of key events later on Thursday.

 

AUD/USD Fundamentals

  • 12:30 US Building Permits. Estimate 0.94M.
  • 12:30 US Core CPI. Estimate 0.2%.
  • 12:30 US Unemployment Claims. Estimate 332K.
  • 12:30 US CPI. Estimate -0.3%.
  • 12:30 US Housing Starts. Estimate 0.98M.
  • 14:00 US Philly Fed Manufacturing Index. Estimate 2.5 points.
  • 14:30 US Natural Gas Storage. Estimate 96B.
  • 16:30 US FOMC Member Sarah Bloom Rosengren 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.