AUD/USD – Edges Higher As Trade Balance Improves

AUD/USD has edged higher in Wednesday trading. The pair has crossed above the 0.95 line early in the North American session. In economic news, Australia’s Trade Balance posted its best numbers in three months. It’s a quiet day in the US, with no major releases on the schedule.

Australia’s trade deficit narrowed in October. The indicator dropped to -0.28 billion, improving from -0.82 billion the month before. This reading beat the estimate of 0.51 billion, and follows a strong Retail Sales release earlier in the week. AIG Construction Index will be released later on Wednesday.

There were no surprises from the RBA, which held the course and kept the benchmark interest rate at 2.50%. In the Bank’s Rate Statement, RBA head Glenn Stevens reiterated his concern about the value of the Australian dollar. Stevens stated that the Aussie was “uncomfortably high” and that “a lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy”. The RBA has stated this sentiment on numerous occasions (although in this instance Stevens employed particularly strong language), but is clearly reluctant to lower interest rates in order to push down the value of the Australian dollar. One possible explanation is that inflation in Australia came in at 2.2% in Q3, and the RBA does not want to take any steps which could raise inflation, such as lowering interest rates.

The Federal Reserve met for a policy meeting last week, the first since Congress reached an agreement on the debt ceiling and the shutdown. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. However, the Fed’s policy statement was less dovish than expected, as the Fed noted that the economy was expanding “at a moderate pace” and left the door open for QE tapering in December. However, the prevailing view in the markets is that short of a sharp turnaround in US numbers, QE tapering will be on hold until early 2014.

AUD/USD for Wednesday, November 6, 2013

AUD/USD November 6 at 14:20 GMT

AUD/USD 0.9528 H: 0.9542 L: 0.9486

AUD/USD Technical

• AUD/USD has edged higher in Wednesday trading. The pair crossed above the 0.95 line in the Asian session and touched a high of 95.42 in European trading.
• On the downside, 0.9508 has reverted to a support role. This is a weak line which could be tested if the pair moves lower. This is followed by strong support at the round number of 0.9400.
• AUD/USD pair is facing resistance at 0.9613. This is followed by a resistance line at 0.9700.
• Current range: 0.9508 to 0.9613

Further levels in both directions:

• Below: 0.9508, 0.9400, 0.9305, 0.9229 and 0.9119
• Above: 0.9613, 0.9700, 0.9821 and 0.9900

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in long positions in Wednesday trading. This is reflected in the current movement of the pair, as the Australian dollar has posted gains. The ratio is made up of a majority of open long positions, reflecting a trader bias towards the Australian dollar continuing to move higher against the greenback.

AUD/USD has pushed higher on Wednesday, and we could see the pair continue to trade in the mid-0.95 range during the day.

AUD/USD Fundamentals

• 00:30 Australian Trade Balance. Estimate -0.51B. Actual -0.28B.
• 12:30 US Challenger Job Cuts. Actual -4.2%.
• 15:00 US CB Leading Index. Estimate. 0.7%. Actual 0.7%.
• 15:30 US Crude Oil Inventories. Estimate 1.7M. Actual 1.6M.
• 22:30 Australian AIG Construction Index.

*Key releases are highlighted in bold

*All release times are GMT

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