AUD/USD – Slide Continues as Aussie Consumer Confidence Plummets

The Australian dollar continues to fall, as the pair fell  below the 0.98 line in Wednesday’s Asian session. AUD/USD continues to struggle, and has dropped into the mid-0.97 range. The Aussie took a hit as Australian Consumer Sentiment posted another sharp decline. In the US, all eyes will be fixed on the Federal Reserve, as Bernard Bernanke testifies before a Congressional Committee and the Fed releases the minutes of its previous policy meeting. The US will release Existing Home Sales later in the day, the first key event of the week.

AUD/USD continues on its downward journey, as Australia released disappointing consumer confidence numbers on Wednesday. Westpac Consumer Sentiment plunged 7.0%, its second straight sharp drop. This indicates weak consumer confidence in the Australian economy, and a pessimistic consumer can be expected to scale back on purchases, which is bad news for the Australian economy. On Tuesday, the RBA released the minutes of its 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 RBA 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 Federal Reserve will be front page and center on Wednesday, as Fed Chairman Bernard Bernanke testifies before a Congressional committee and the Fed releases the minutes of the last FOMC meeting. The $64,000 question is whether the Fed will make any changes to its current round of quantitative easing, which involves the purchase of $85 billion in assets each month. There are signs that the Fed is mulling making a move, despite lukewarm US numbers of late. Last week, 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. As the QE program is dollar negative, any moves by the Fed to wind up QE could have a strong impact on the movement of USD/JPY.

US releases have not looked good lately, and last week’s numbers were, for the most part, disappointing. Inflation and manufacturing numbers fell below expectations, and housing data did not meet the forecast. Unemployment Claims had looked impressive in recent readings, but was well above expectations, pointing to weakness on the job front. There was better news from Building Permits, and the UoM Consumer Sentiment shot up to wrap up the week. Trying to determine the extent of the US recovery continues to be difficult, as the economy has yet to demonstrate sustained growth and produce continuous positive releases.

 

AUD/USD for Wednesday, May 22, 2013

Forex Rate Graph 21/1/13
 

AUD/USD May 22 at 11:30 GMT

AUD/USD 0.9762 H: 0.9828 L: 0.9740

 

AUD/USD Technical

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

 

AUD/USD has lost more ground in Wednesday trading, but the proximate support and resistance lines remain in place (S1 and R1 above). The pair continues to receive support at 0.9727. This line could be tested if the Aussie continues to drop. There is stronger support at 0.9651. On the upside, the pair is putting pressure on 0.9795. This is a weak line, and could see further 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 ratio continues to heavily favor long positions, as the sliding pair has covered a large number of short positions.

The Aussie can’t seem to get a break, as it continues to lose more ground. Australian consumer confidence numbers were a bust, adding to the Australian dollar’s woes. We could see further action, as the markets wait to hear from the US Federal Reserve, and the US releases key housing numbers later in the day.

 

AUD/USD Fundamentals

  • 0:30 Australian Westpac Consumer Sentiment. Actual -7.0%.
  • 14:00 US Existing Home Sales. Estimate 4.99M
  • 14:00 US Fed Chairman Bernard Bernanke testifies before Congress Joint Economic Committee
  • 14:00 US Treasury Secretary Jack Lew Speaks
  • 14:30 US Crude Oil Inventories. Estimate -0.4M
  • 18:00 US FOMC Meeting Minutes

 

*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.