AUD/USD – Aussie Higher as Chinese CPI Jumps

AUD/USD has edged higher in Monday trading, as the pair trades in the high-94 range. In economic news, Australian Home Loans Change declined for the first time in seven months. However, there was good news as Chinese CPI beat the estimate. Later on Monday, Australia well release the RBA Monetary Policy Meeting Minutes and New Motor Vehicle Sales. There are no US releases on Monday, as the markets are closed for Columbus Day. In Washington, negotiations over the US shutdown and debt ceiling remain deadlocked, as weekend talks failed to achieve a breakthrough.

The week got off to slow start in Australia, as Home Loans posted a sharp decline of -3.9%. It was the weakest reading from the important housing indicator since March 2011. The indicator has looked solid in recent readings, so the poor release surprised the markets, which had expected a smaller drop of -2.1%. In China, CPI jumped from 2.6% to 3.1%, its highest level since February. This beat the estimate of 2.8%, and points to increased activity in the Chinese economy. The Australian dollar is sensitive to key Chinese data, as the Asian giant is Australia’s number one trading partner.

Over the weekend, negotiations continued on Capitol Hill between the Republican and Democrat Senate leaders, but they failed to reach on agreement on the debt ceiling, which will be reached on Thursday. The parties have made little progress on the budget deadlock, as the government shutdown heads into its third week. A bipartisan proposal has been floated which would fund the government for six months and raise the debt limit until January 31. In the meantime, the impasse on Capitol Hill continues, and it’s hard to see how the markets can remain calm in this crisis-filled atmosphere.

The debt ceiling crisis is generating headlines the world over, as a US default on its financial obligations could lead to severe damage to the global economy. The US is being urged to get its act together, and quickly. The IMF has warned that the continuing uncertainty emanating out of Washington could lead to a world recession. ECB President Mario Draghi has also weighed in, saying that it was “unthinkable” that Congress would not reach an agreement on the debt ceiling.

QE tapering, one of the hottest topics in the markets just a few weeks ago, has quickly moved to the backburner, courtesy of the budget and debt ceiling crises which have gripped Washington. Last week, the Fed released the minutes of its September policy meeting. At that meeting, the Fed surprised the markets by not reducing 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 raised speculation that we could see tapering before the end of the year. However, the Fed is reluctant to make any major moves in the midst of the political crisis the US is currently experiencing. As well, the Fed is “data dependent”, and key releases such as Non-Farm Payrolls have been suspended to the shutdown. This makes it difficult for the Fed to get an accurate picture of the true state of the economy. The bottom line? We may not see any QE moves by the Fed before the end of the year.

 

AUD/USD for Monday, October 14, 2013

Forex Rate Graph 21/1/13

AUD/USD October 14 at 13:25 GMT

AUD/USD 0.9480 H: 0.9481 L: 0.9435

 

AUD/USD Technical

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

 

  • AUD/USD has posted gains in Monday trading. The pair has been moving higher since early in the Asian session.
  • The pair faces resistance at 0.9508. This is a weak line which could be tested during the day. 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. 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

A majority of the open positions in the AUD/USD ratio are long, reflecting a trader bias towards the Australian dollar continuing to gain ground.

The Australian dollar has moved higher on Monday, getting a boost from unexpectedly strong Chinese inflation data. The US markets are closed, so we are unlikely to see much movement from the pair in the North American session.

 

AUD/USD Fundamentals

  • 00:30 Australian Home Loans. Estimate -2.1%. Actual -3.9%.

 

*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.