AUD/USD – Aussie Shrugs Off Weak Employment Change

AUD/USD is showing little activity on Thursday, continuing the trend we have seen all week. In Thursday’s European session, the pair is trading in the mid-94 range. In economic news, Australian Employment Change rebounded sharply. but was still well off the estimate. In the US, today’s major release is Unemployment Claims. In other news, Janet Yellen was nominated by President Obama to head the Federal Reserve. As well, the FOMC Meeting minutes indicated that most policymakers favor tapering QE before the end of the year.

Australian Employment Change, a key release, rebounded after two straight declines. The indicator posted a gain of 9.1 thousand, but this was well of the estimate of 15.2 thousand. The Unemployment Rate dropped from 5.8% to 5.6%, surprising the markets, which had expected the rate to remain unchanged in September. However, the drop in the rate can be attributed to a decrease in the participation rate, which fell to 64.9%, a 7-year low. The Aussie initially lost ground following the employment releases, but has since recovered.

President Obama nominated Susan Yellen to head the Federal Reserve. Yellen will take over from Bernard Bernanke, who is due to retire early next year. Yellen, who currently serves as Fed vice-chairwoman, became the leading candidate after former Treasury Secretary Lawrence Summers withdrew his candidacy. Yellen is considered dovish in stance and has supported Bernanke in three rounds of QE increases. Her nomination must be confirmed by the Senate, but she is expected to be widely endorsed for her new post.

The minutes of the September Federal Reserve policy meeting were released on Wednesday. At the meeting, the Fed surprised the markets by opting to hold the course with its bond-purchasing program, which currently runs at $85 billion/mth. The minutes stated that the decision not to begin tapering was a “close call”. This has increased speculation that we could see tapering before the end of the year. However, the monkey wrench in all this is the fiscal uncertainty from shutdown and looming debt crisis. As well, the Fed is heavily dependent on key releases such as Non-Farm Payrolls, which have been suspended to the shutdown. So it’s unlikely that we’ll see any moves to reduce QE before December at the earliest.

As if Congress doesn’t have its plate full with the budget deadlock and shutdown, a debt ceiling crisis and could unleash a devastating financial crisis. The US has a debt worth $16.7 trillion, and the country 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 domestic and international markets. There is a lot of bad blood between the Republicans and Democrats over the shutdown, and this will undoubtedly complicate negotiations over the debt ceiling. There are signs of some progress, with talks between the sides focusing on the possibility of a short-term increase in the debt limit, which would avoid a default, for now.

 

AUD/USD for Thursday, October 10, 2013

Forex Rate Graph 21/1/13 

AUD/USD October 10 at 12:15 GMT

AUD/USD 0.9434 H: 0.9472 L: 0.9390

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9221 0.9328 0.9400 0.9508 0.9613 0.9700

 

  • AUD/USD continues to trade quietly in the mid-94 range in Thursday trading.
  • The pair faces resistance at 0.9508. 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 is a weak line which could face strong pressure if the Australian dollar weakens. The next support line is at 0.9328.
  • Current range: 0.9400 to 0.9508

 

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 indicating movement towards short positions in Thursday trading. This is reflected in the current movement of the pair, as the Australian dollar is down slightly against the US currency. A majority of the open positions are long, reflecting a trader bias towards the Australian dollar gaining ground.

The pair continues to trade quietly in Thursday trading. The Australian dollar didn’t react to weak Australian employment data, but that could change in the North American session, when the US releases Unemployment Claims, a key event.

AUD/USD Fundamentals

  • 00:00 Australian MI Inflation Expectations. Actual 2.0%.
  • 00:30 Australian Employment Change. Estimate 9.1K. Actual 15.2K.
  • 00:30 Australian Unemployment Rate. Estimate 5.8%. Actual 5.6%.
  • 12:00 US Treasury Secretary Jack Lew Speaks. Lew will testify on the debt limit before the Senate Finance Committee.
  • 12:30 US Unemployment Claims. Estimate 307K.
  • 13:45 US FOMC Member James Bullard Speaks.
  • 14:30 US Natural Gas Storage. Estimate 96B.
  • 17:01 US 30-year Bond Auction.
  • 16:45 US FOMC Member Daniel Tarullo 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.