AUD/USD – Slight Gains Despite Weak Australian numbers

After a disastrous May, the Australian dollar has posted some gains to start June. AUD/USD has pulled away from the 0.96 line, and was trading in the mid-0.96 range in Monday’s European session. The Aussie has managed to shake off some weak Australian data, notably Retail Sales, which came in slightly below the estimate. The markets will be keeping a close watch as the RBA sets its key interest rate early Tuesday. Most analysts are predicting no change to the current rate of 2.75%, but the RBA has a habit of surprising the markets with unexpected rate reductions. In the US, today’s highlight is ISM Manufacturing PMI. Will we see the US bounce back from last week’s disappointing major releases?

The Australian dollar got some help over the weekend from its biggest trading partner, as Chinese Manufacturing PMI remained above the 50-point line, posting a reading of 50.8 points. This surpassed the estimate of 49.9 points. An increase in Chinese production means a demand for raw materials from Australia, which is good news for the Australian economy. However, Australian data did not look as sharp on Monday. Retail Sales, a key release, bounced back from a decline and gained 0.2% in May, but this was below the forecast of 0.3%. ANZ Job Advertisements posted another decline, as the employment indicator dropped 2.4%. The indicator has recorded only one gain this year, underscoring weakness in the Australian employment sector. There was good news from Company Operating Profits, which rose 3.0%, well above the estimate of 1.6%.

The Australian dollar couldn’t bid goodbye to the month of May fast enough. The Aussie suffered a horrendous month of May, plunging more than seven cents against the US dollar. The surging US dollar took advantage of the recent RBA rate cut, lukewarm Australian data and the government’s budget which pointed to the high value of the Australian dollar as an impediment to economic growth. Weak US numbers also weighed on the risky Aussie. These factors have resulted in nervous investors shifting their funds to the safe-haven US dollar, resulting in the Australian dollar plunging in value.

In the US, there is growing speculation that the Federal Reserve could scale back quantitative easing in the next few months. Fed policymakers, including Fed Chair Bernanke, continue to hint that QE could be wound up in the next few months. However, with the US continuing to alternate between good and bad economic releases, the Fed is unlikely to act before it is convinced that the US economy is improving. Much of the volatility we are seeing from the US dollar against the major currencies can be attributed to market uncertainty about what action the Fed will take, and further hints from the Fed about scaling back QE will continue to impact on the currency markets.

 

AUD/USD for Monday, June 3, 2013

Forex Rate Graph 21/1/13
 

AUD/USD June 3 at 12:05 GMT

AUD/USD 0.9663 H: 0.9664 L: 0.9620

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9405 0.9541 0.9651 0.9727 0.9795 0.9907

 

AUD/USD has posted modest gains in the Monday session. On the downside, the pair is putting pressure on 0.9651, and this line could fall if the US dollar shows any upward movement. There is stronger support at 0.9541. On the upside, the pair faces resistance at 0.9727. The next resistance line is at 97.95, protecting the 0.98 level.

  • Current range: 0.9651 to 0.9727

 

Further levels in both directions:

  • Below: 0.9651, 0.9541, 0.9405, 93.28 and 92.21
  • Above: 0.9727, 0.9795, 0.9907 and 1.00

 

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to movement towards short positions in Monday trading. This is not reflected in the pair’s current movement, as the Aussie has put together a modest rally against the US currency. The ratio is dominated by long positions, as trader sentiment is strongly biased towards the Australian dollar continuing to push higher against the US dollar.

 

AUD/USD Fundamentals

  • 0:30 Australian MI Inflation Gauge. Actual 0.2%
  • 1:30 Australian Retail Sales. Estimate 0.3%. Actual 0.2%
  • 1:30 Australian ANZ Job Advertisements. Actual -2.4%
  • 1:30 Australian Company Operating Profits. Estimate 1.6%. Actual 3.0%
  • 6:30 Australian Commodity Prices. Actual -8.6%
  • 13:00 US Final Manufacturing PMI. Estimate 52.0 points
  • 14:00 US ISM Manufacturing PMI. Estimate 50.6 points
  • 14:00 US Construction Spending. Estimate 1.1%
  • 14:00 US ISM Manufacturing Prices. Estimate 49.6 points
  • All Day: US Total Vehicle Sales. Estimate 15.2M

 

*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.