AUD/USD – Australian Dollar Higher As Business Confidence Sparkles

AUD/USD has pushed higher in Tuesday trading. The pair has pushed close to the 0.95 line in European trading. The Australian dollar took advantage of an excellent NAB Business Confidence release, which hit its highest level since February 2011. There are only two minor releases out of the US, so the markets will be paying more attention to the FOMC minutes, scheduled for release on Wednesday. The shutdown has now reached Day 8, amid little indication that the crisis will end anytime soon.

The Australian dollar move higher on Tuesday, following a strong showing by NAB Business Confidence. The indicator shot up to 12 points in September, up from 6 points the month before. Business confidence has taken off in the last few months, and this bodes well for the Aussie. Elsewhere, ANZ Job Advertisements posted a modest gain of 0.2%, the first gain we’ve seen from the indicator is seven months. We’ll get a look at consumer confidence late Tuesday, with the release of Westpac Consumer Sentiment.

The US government shutdown is now in its second week, as the Democrats and Republicans continue to play the blame game. Republicans had demanded that the Democrats delay implementation of the 2010 health care act, known as Obamacare, before agreeing to pass a budget. The Democrats have refused, saying the budget must first be passed before any discussions can be held. There are increasing concerns that a prolonged shutdown could affect the fragile US recovery. If the shutdown does continue, we could see some instability in the markets this week, and the US dollar, which is already under strong pressure, could lose ground.

As political squabbling has held up the US budget, a far more serious crisis is lying just around the corner – the debt ceiling. The US has a debt worth $16.7 trillion, and will run out of funds to service the debt by October 17, unless Congress authorizes raising the debt ceiling. Otherwise, the US could potentially default on its obligations, which could cause chaos in the markets. A US default has not been priced in the markets, and such a cataclysmic event has never happened. With just 10 days until the ceiling is reached, we could see the markets get restless if the politicians in Washington don’t get their act together quickly.

Most analysts predicted that the Federal Reserve would taper QE in September, and the markets were caught by surprise when the Fed balked and maintained the levels of the bond-buying program at $85 billion/mth. However, the landscape has changed dramatically in the past few weeks, with the budget deadlock in Washington as well as growing fears about a debt ceiling crisis. Meanwhile, distortions and delays in key economic data will make it difficult for investors to gauge what the Fed is planning. On Friday, Non-Farm Payrolls and the Unemployment Rate were cancelled, and further data will have to be postponed as the shutdown continues. The FOMC minutes will be released on Wednesday, and this event is often a market-mover, so we could be in for some volatility in the currency markets.

AUD/USD for Tuesday, October 8, 2013

AUD/USD October 8 at 13:00 GMT

AUD/USD 0.9479 H: 0.9484 L: 0.9412

AUD/USD Technical

• AUD/USD has posted gains in Tuesday trading.  slightly above the 0.94 line. The pair has touched a high of 0.9483 in the European session.
• The pair faces resistance at 0.9508. This weak line could be tested if the Aussie continues to gain ground. This is followed by a resistance line at 0.9613.
• On the downside, the pair continues to receive support at the round number of 0.9400. This line has some breathing room as the pair trades close to the 0.95 line. There is stronger support at 0.9328.
• Current range: 0.9400 to 0.9528

Further levels in both directions:

• Below: 0.9400, 0.9328, 0.9221, 0.9135 and 0.9089
• Above: 0.9508, 0.9613, 0.9700 and 0.9821

OANDA’s Open Positions Ratio

AUD/USD is unchanged in Tuesday trading. This is not reflective of the pair’s current movement, as the Australian dollar has posted gains against its US counterpart.

The pair has pushed higher on Tuesday, thanks to solid Australian data. With no major economic releases due out of the US, we could see a quiet North American session.

AUD/USD Fundamentals

• 00:30 Australian ANZ Job Advertisements. Actual 0.2%.
• 00:30 Australian NAB Business Confidence. Actual 12 points. Estimate 6 points.
• 23:30 Australian Westpac Consumer Sentiment.
• 11:30 US NFIB Small Business Index. Estimate 95.2 points. Actual 93.9 points.
• 14:00 US IBD/TIPP Economic Optimism. Estimate 46.2 points.

*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.