AUD/USD – Aussie Higher As Congress Reaches Debt Deal

AUD/USD has posted gains in Thursday trading, as Congress reached a deal to reopen the government and raise the debt limit. The pair is trading in the low-96 range in Thursday’s European session. In economic news, there are two major releases on the schedule – Unemployment Claims and the Philly Fed Manufacturing Index. In Australia, NAB Quarterly Business Confidence hit its highest level since early 2011.

With the US staring at a sovereign default for the first time in its history, the Republicans and Democrats finally reached as deal in Congress on Wednesday to reopen the government and raise the debt ceiling. The agreement passed by wide margins in both the Senate and House. However, the deal provides short-term relief only – the government will be funded until January 15, while the debt limit will be raised until February 7. Both sides agreed to discuss budget issues and try to reach a long-term agreement before December 13. The Republicans appear to be the big losers in this sorry tale, as they failed to obtain any concessions regarding the Obama Health Care Act and are blamed by most of the public for precipitating an unnecessary political and fiscal crisis.

After weeks of bitter partisanship and political brinkmanship, Congress finally got its act together and voted to fund the government and raise the debt ceiling. The shutdown, which lasted for over two weeks and temporarily threw hundreds of thousand of federal employees out of work, is estimated to have cost the economy $24 billion. The cost of the debt crisis is harder to quantify, but has certainly eroded faith in the US economy and perhaps in the US dollar as well. This was underscored by a warning from Fitch Ratings on Tuesday, when the agency put US debt on a negative watch. Fitch stated that the crisis had cast doubt over the credit of the United States and had undermined confidence “in the role of the US dollar as the pre-eminent global reserve currency”.

With the market’s attention centered crisis in Washington, US economic releases, even major events, have been shunted to the backburners. However, Thursday’s US Unemployment Claims is a key release that could affect the US dollar. With major releases such as Non-Farm Payrolls suspended to the US shutdown, Unemployment Claims has magnified in its importance. Last week’s release, which was  very high, was not considered accurate due to technical problems, so this week’s numbers are being eagerly awaited. The markets are bracing for another weak release, with an estimate of 357 thousand.

AUD/USD for Thursday, October 17, 2013

AUD/USD October 17 at 11:20 GMT

AUD/USD 0.9612 H: 0.9620 L: 0.9528

AUD/USD Technical

• AUD/USD has posted strong gains in Thursday trading. The pair has been on an upward trend throughout the European session.
• The pair is testing resistance at 0.9613. This is followed by resistance line at the round number of 0.9700.
• On the downside, the pair is receiving  support at 0.9508. This line has strengthened as the pair trades at higher levels. 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

AUD/USD ratio is unchanged in Thursday trading. This is not reflected in the pair’s current movement, as the Australian dollar has moved higher at the expense of the greenback. 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 is once again marching upwards and has gained about 150 points this week. With the US releasing key employment and manufacturing data later today, we could see some movement from the pair during the North American session.

AUD/USD Fundamentals

• 1:30 Australian NAB Quarterly Business Confidence. Actual 3 points.
• 12:30 US Unemployment Claims. Estimate 357K.
• 14:00 US Philly Fed Manufacturing Index. Estimate 15.4 points.
• 16:45 US FOMC Member Charles Evans Speaks.
• 16:45 US FOMC Member Esther George Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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