AUD/USD – Aussie Struggling Close to 0.90 Level

The Australian dollar has been pointed in a downward direction all week and briefly fell below the critical 0.90 line in European trade on Thursday. The Aussie has lost about two cents against the US dollar this week. Taking a look at economic releases, Australian CB Leading Index disappointed, posting its first decline since February. Chinese Manufacturing PMI brought better news, as the key index crossed above the 50-point level. In the US, today’s highlight is US Unemployment Claims.

Australian data continues to look weak and that is bad news for the shaky Australian dollar. The CB Leading Index posted a 0.2% decline, the indicator’s first drop since February. There was positive news out of China, as Chinese Manufacturing PMI jumped from 47.7 to 51.1 points, a four-month high. The estimate stood at 48.3 points. Chinese key events are often market-movers for the Australian dollar, as China is Australia’s number one trading partner.

Earlier in the week, the RBA released the minutes of its most recent policy meeting. At the meeting, the RBA decided to lower rates from 2.75% to 2.50%. The central bank said that another interest rate cut is not imminent. This was good news for the Aussie, as another interest rate cut would make the currency less attractive to investors. The RBA also indicated that it would welcome further depreciation of the Australian dollar in order to strengthen the economy. The bottom line? The RBA would prefer not to have to reduce interest rates in the near future, but is prepared to act if the Australian dollar moves higher and pulls away from the 0.90 level. The Aussie has lost some 11% in the past six months, and it’s clear that the RBA does not want it returning to high levels.

There has been plenty of speculation about when the Federal Reserve will scale back its QE program, and the markets were hopeful that the release on Wednesday of the FOMC minutes of its most recent policy meeting would shed some light on the Fed’s plans. The minutes didn’t contain any dramatic news, but the US dollar was broadly stronger following their release. Fed officials were described as “broadly comfortable” with plans to taper QE, but remain split on the timing of such a move. The policymakers noted that recent US economic data was “mixed” and all members agreed that it was still too early to scale back the current QE program, under which the Fed purchases $85 billion in assets each month. The markets are anticipating that the Fed will make a move in the near future, and traders should be prepared for a scaling back of QE as early as September.

 

AUD/USD for Thursday, August 22, 2013

Forex Rate Graph 21/1/13
 

AUD/USD August 22 at 13:00 GMT

AUD/USD 0.9030 H: 0.9033 L: 0.8932

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.8848 0.8926 0.9000 0.9089 0.9135 0.9221

 

AUD/USD is trading in the low 0.90 range early in the North American session. The pair has shown some volatility, touching a low of 0.8932 in the Asian session. The pair bounced back and crossed above 0.90 in the European session. This critical line is now providing the pair with weak support. The next support level is at 0.8926.

On the upside, there is resistance at 0.9089. This line could face pressure if the Australian dollar moves higher. This is followed by resistance at 0.9135.

  • Current range: 0.9000 to 0.9089

 

Further levels in both directions:

  • Below: 0.9000, 0.8926, 0.8848, 0.8747, 0.8578 and 0.8467.
  • Above: 0.9089, 0.9135, 0.9221 and 0.9328

 

OANDA’s Open Positions Ratio

AUD/USD ratio shows a strong majority of long positions, which currently outnumber short positions by about 2:1. This indicates that trader sentiment is strongly biased towards the Aussie making gains against the US dollar.

The Aussie remains under pressure and is struggling to remain above the 0.90 line. With the US releasing key employment numbers later in the day, we could see some volatility from the pair.

 

AUD/USD Fundamentals

  • 00:00 Australian CB Leading Index. Actual -0.2%.
  • 12:30 US Unemployment Claims. Estimate 329K.
  • 13:00 US Flash Manufacturing PMI. Estimate 54.1 points.
  • 13:00 US HPI. Estimate 0.6%.
  • 14:00 US CB Leading Index. Estimate 0.5%.
  • 14:30 US Natural Gas Storage. Estimate 68B.
  • Day 1 – Jackson Hole Symposium.
  • 19:15 US Treasury Secretary Jack Lew 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.