AUD/USD – Under Pressure as Markets Eye US Housing Release

The Australian dollar continues to struggle against the US dollar and finds itself slightly below the 0.90 line in Friday’s European session. The Aussie has lost about two cents against the US dollar this week. It’s a very quiet end to the week, with just one release – US New Home Sales. As well, the Jackson Hole Summit continues and will wrap up on Saturday. There are no Australian releases on Friday.

Australian data continues to look weak and that is bad news for the shaky Australian dollar. On Thursday, 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, but the Australian dollar didn’t receive a boost from the strong Chinese numbers.

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 Australian 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 the RBA would likely reduce rates if the Aussie starts to climb back up.

There has been a lot of speculation about when the Federal Reserve will taper its QE program, and the markets were hopeful that the release earlier this week of the FOMC minutes from 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 posted gains after 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.

Meanwhile, the Kansas City Federal Reserve is currently holding its annual economic summit in Jackson Hole, Wyoming. The conference attracts central bankers, finance ministers and academics, and has been a market-mover on previous occasions. Federal Reserve chair Bernard Bernanke will not be attending, but other high-profile Federal Reserve policymakers are participating. The markets are monitoring the conference, hoping for some clues about QE tapering and future monetary policy.

AUD/USD for Friday, August 23, 2013

AUD/USD August 23 at 12:30 GMT

AUD/USD 0.8994 H: 0.9037 L: 0.8972

AUD/USD Technical

AUD/USD is trading below the 0.90 level early in the North American session on Friday. The pair touched a high of 0.9037 in Asian trading, but was unable to hold onto these gains and dropped below 0.90 in European trading. AUD/USD is currently testing the 0.90 level on the upside. This is followed by stronger support at 0.9089.

On the downside, there is support at 0.8926. This is followed by support at 0.8848. This line was last tested in late July.

• Current range: 0.8926 to 0.9000

Further levels in both directions:

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

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to movement in favor of long positions. This is reflected in the pair’s current movement, as the Australian dollar has edged higher and continues to test the 0.90 line. The makeup of the ratio shows a solid majority of long positions, indicating that trader sentiment is strongly biased towards the Aussie making gains against the US dollar.

The Aussie remains under pressure as it tries to move back into 0.90 territory. With the US releasing key housing numbers later in the day, we could see some movement from the pair before the trading week wraps up.

AUD/USD Fundamentals

• 14:00 US New Home Sales. Exp. 487K.
• Day 2 – Jackson Hole Symposium.

*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.