AUD/USD – Aussie Edges Lower As RBA Releases Minutes

The Australian dollar remains under strong pressure from its US cousin, as the pair dipped below the 98 level in Tuesday’s European session. The Aussie edged lower following the release of the RBA’s most recent policy meeting. Australian CB Leading Index posted a weak gain of just 0.1%. In the US, there are no fundamental releases. However, the market will have a chance to scrutinize remarks by US Treasury Secretary Jack Lew and two FOMC members. 

The Australian dollar has had a miserable May, losing around six cents since the beginning of the month. There was no relief from Tuesday’s release of the minutes of the RBA’s most recent policy meeting. At that time, the RBA surprised the markets with a rate cut from 3.0% to 2.75%, and the Aussie has been on a sharp downhill ride ever since. The minutes stated that the RBA reduced rates in response to low inflation and a strong Australian dollar, which were hindering economic growth. The central bank also predicted improvement in the economies of Australia’s major trading partners – China, Japan and the US. This is expected to boost Australian exports and help the struggling economy. Meanwhile, the Aussie’s free-fall in recent weeks make another rate cut in the near future less likely.

The markets were treated to a host of US releases last week, and for the most part, they didn’t like what they saw. US Inflation and manufacturing numbers fell below expectations, and housing numbers were also weak. Unemployment Claims, one of the most important releases and often a market-mover, had looked impressive in recent readings. However, the key indicator couldn’t keep pace last week, as the number of new claims jumped to 360 thousand, much higher than the estimate of 332 thousand. There was some good news from Building Permits, which were up nicely. On Friday, there was some relief from UoM Consumer Sentiment which jumped from 72.3 points to 83.7 points. This was well above the estimate of 77.9 points, and points to a sharp increase in consumer confidence. However, the host of weak US numbers we saw last week will again bring into question the extent of the US recovery, which has not been able to demonstrate sustained growth and continuous positive releases.

The US Federal Reserve has not been in the spotlight recently, but that could change if the Fed modifies its current round of quantitative easing, which involves the purchase of $85 billion in assets each month. The Fed will be tempted to act if it feels that the US recovery has gained more traction, giving it some room to ease up on QE. On Thursday, John Williams, president of the Federal Reserve Bank of San Francisco, stated that the Fed could begin reducing QE this summer and terminate bond buying late in 2013. After every solid US release, (which have been heavily outnumbered by weak data), speculation rises that the Fed could take action. As the QE program is dollar negative, any moves by the Fed to wind up QE would be bullish for the dollar at the expense of the euro. So traders can expect any new developments (real or rumor) regarding QE to impact on the currency markets.

 

AUD/USD for Tuesday, May 21, 2013

Forex Rate Graph 21/1/13
 

AUD/USD May 21 at 12:10 GMT

AUD/USD 0.9786 H: 0.9842 L: 0.9752

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9541 0.9651 0.9727 0.9795 99.07 1.00

 

AUD/USD has edged lower in Tuesday trading, and the proximate support and resistance lines remain in place (S1 and R1 above). The pair continues to receive support at 0.9727. The next support level is at 0.9651. On the upside, the pair is putting pressure on 0.9795. This line has already been breached today, and could see more activity. There is stronger resistance at 99.07.

  • Current range: 0.9727 to 0.9795

 

Further levels in both directions:

  • Below: 0.9727, 0.9651, 0.9541, 0.9405 and 93.28
  • Above: 0.9795, 0.9907, 1.00 and 1.0080

 

OANDA’s Open Positions Ratio

AUD/USD ratio is continuing the trend we saw last week, showing little change this week as well. The pair has dropped slightly on Tuesday – if this downward movement continues, we could see some activity from the ratio as well.

The Aussie can’t seem to get a break, and has lost more ground following the RBA minutes release. Australia releases consumer confidence numbers early on Wednesday, and this could impact on AUD/USD.

 

AUD/USD Fundamentals

  • 0:00 Australian CB Leading Index. Actual 0.1%.
  • 1:30 Australian Monetary Policy Meeting Minutes.
  • 14:00 US Treasury Secretary Jack Lew Speaks.
  • 15:30 US FOMC Member James Bullard Speaks.
  • 17:00 US FOMC Member William Dudley 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.