AUD/USD – Australian Dollar Higher After RBA Minutes

AUD/USD has posted modest gains on Tuesday, as the pair trades in the low-95 range in the European session. The Aussie received support from the minutes of the previous RBA policy meeting, which indicated that the central bank was not planning any further rate cuts. New Motor Vehicle Purchases disappointed, posting a slight decline. In the US, the markets will be keeping an eye on the Empire State Manufacturing Index. In Washington, there are reports that the sides are near an agreement on the looming debt ceiling as well as the government shutdown, which has entered its third week.

The Australian dollar continues to look strong this week. AUD/USD pushed close to 0.9550 on Tuesday, its highest level since mid-June. The currency got a boost following the release of the RBA minutes, which indicated that the central bank was leaning to maintaining present rate levels, as previous cuts were still affecting the economy. The minutes took note of the recent appreciation of the Australian dollar, but questioned whether this trend would continue. Analysts note that with the Australian economy showing signs of improvement, the RBA has no problem remaining on the sidelines while keeping a watchful eye on the economy.

Politicians in Washington are racing to reach some agreement before the US hits the debt ceiling on Thursday. If Congress fails to agree on raising the debt limit before then, the US treasury will be unable to pay the country’s bills. This could lead to the US defaulting on its debt, which could cause chaos in the domestic and international markets. High-level talks over the weekend failed to break the impasse, but Senate Majority Leader Harry Reid sounded optimistic on Monday, saying that the sides had made “tremendous progress”. The talks are focusing on raising the debt ceiling for several more months until a more comprehensive agreement can be reached. Presumably, an agreement would also end the government shutdown, at least temporarily, allowing the government to resume operations.

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’re unlikely to see any QE moves by the Fed before December, at the earliest.

AUD/USD for Tuesday, October 15, 2013

AUD/USD October 15 at 12:15 GMT

AUD/USD 0.9525 H: 0.9548 L: 0.9508

AUD/USD Technical

• AUD/USD has posted modest gains in Tuesday trading. The pair touched a high of 0.9548 in the European session, as the Aussie continues to exert pressure on the US dollar.
• The pair faces resistance at 0.9613. This is followed by resistance line at the round number of 0.9700.
• On the downside, the pair is receiving weak support at 0.9508. This is followed by a strong support line at 0.9400.
• Current range: 0.9508 to 0.9613

Further levels in both directions:

• Below: 0.9508, 0.9400, 0.9328, 0.9221 and 0.9135
• Above: 0.9613, 0.9700, 0.9821 and 0.9900

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 posted modest gains on Tuesday, getting a boost from hawkish RBA minutes. With talk of an impending agreement on the debt ceiling, we could see some volatility from the pair in the North American session.

AUD/USD Fundamentals

• 00:30 RBA Monetary Policy Meeting Minutes.
• 00:30 Australian New Motor Vehicle Sales.
• 1:00 Federal Reserve Chairman Bernard Bernanke Speaks.
• 12:30 US Empire State Manufacturing Index. Estimate 8.2 points.
• 14:00 FOMC Member William Dudley Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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