AUD/USD – Steady after Recent Sharp Losses

The Australian dollar has stabilized in Friday trading, after sustaining sharp losses this week. The Aussie has lost over three cents this week against the surging US dollar. In Friday’s European session, the pair in trading in the mid-92 range. It’s a very quiet Friday, with no Australian or US releases on schedule. There was one key release today in China, as Flash Manufacturing PMI dropped to a seven-month low. The index fell to 48.3 points, its second straight reading below the 50-point level. This is a cause of concern since it indicates contraction in the Chinese Manufacturing sector. This could weigh on the Aussie, as weakness in China would likely reduce the demand for Australian exports to the Asian giant.

The Aussie plunged almost two cents on Wednesday, after Federal Reserve chair Bernard Bernanke said that QE would likely be scaled down in 2013, and could be terminated in 2014, if the economy continues to improve. The Fed said it expects the U.S. economy to grow between 2.3% and 2.6% this year, and unemployment should fall to between 6.5% and 6.8% by the end of 2014. This means that if the US economy shows stronger growth and unemployment falls, there is a strong likelihood that the Fed will scale down QE. It should be remembered that the Federal Reserve is not making any changes at present to QE, which involves bond purchases of $85 billion each month by the Federal Reserve. Bernanke’s comments boosted the dollar against the major currencies, since winding up QE is dollar-positive. The Australian dollar has now lost a remarkable 11 cents in less than three months.

Earlier this week, the Aussie took a tumble courtesy of the RBA, which released the minutes of its previous policy meeting. Policymakers left the door open for further rate cuts down the road, which would make the Australian dollar less attractive to investors. The RBA also stated that the Australian dollar could fall further due to weak demand for Australian exports. AUD/USD responded by shedding more than one cent after the RBA release.

 

AUD/USD for Friday, June 21, 2013

Forex Rate Graph 21/1/13
 

AUD/USD June 21 at 10:20 GMT

AUD/USD 0.9226 H: 0.9259 L: 0.9195

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9071 0.9135 0.9221 0.9328 0.9405 0.9541

 

AUD/USD has settled down after shop losses this week. The pair dipped below the 0.92 line in the Asian session, but remains in 0.92 territory. On the upside, the pair is currently facing resistance at 0.9328. This is followed by resistance at 0.9405. On the downside, the pair is testing support at 0.9221. This line could break if the Aussie slump continues. There is a stronger support line at 0.9135.

  • Current range: 0.9221 to 0.9328

 

Further levels in both directions:

  • Below: 0.9221, 0.9135, 0.9071, 0.9000, 0.8916 and 0.8747
  • Above: o.9328, 0.9405, 0.9541 and 0.9651

 

OANDA’s Open Positions Ratio

AUD/USD ratio is unchanged in Friday trading. This is consistent with what we are currently seeing from AUD/USD, as the pair trades quietly. Traders should keep a close eye on the ratio, as renewed activity could be an early indication of a breakout by the pair.

The Aussie has settled down after sustaining sharp losses following the Fed comments regarding QE. There are no major releases today from Australia or the US, and AUD/USD has not reacted to a weak Chinese manufacturing release. So we could see the pair continue to trade quietly as we wrap up the trading week.

AUD/USD Fundamentals

  • There are no Australian or US releases on Friday.

 

 

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.