AUD/USD – Aussie Loses Ground As US Retail Sales Beats Estimate

AUD/USD has reversed direction and coughed up Tuesday’s gains. The pair has dropped below the 0.94 level in Wednesday trading. In economic news, it’s a busy day for US releases. Retail Sales and Core Retail Sales both beat their estimates, while Core CPI matched the forecast. There’s more to come, with the release of Existing Home Sales and the Federal Reserve policy meeting minutes. In Wednesday’s only Australian event, RBA Assistant Governor Guy Debelle spoke at a financial forum in Sydney.

It’s been a slow week until now for US key releases, but the markets have plenty of data to analyze on Wednesday. Core Retail Sales posted a weak gain of 0.2%, compared to 0.4% in the previous release. However, this was good enough to beat the estimate of 0.1%. Retail Sales looked stronger, posting a gain of 0.4%, bouncing back from last month’s reading of -0.1%. Core CPI came in at 0.1%, matching the forecast. This is the third straight month that Core CPI has posted this weak figure, so clearly low inflation remains a concern. To underscore this point, CPI dropped 0.1%, its first decline since May.

Later on Wednesday, the Federal Reserve will release the minutes of its most recent policy meeting. This event is a market-mover and analysts will be paying close attention to the minutes, especially regarding QE. The markets are expecting the Fed to hold off from tapering in December, as US numbers are still not as strong as the Fed would like. Market sentiment is leaning towards the Fed sticking to its present monetary policy, and any surprises in the minutes would likely shake up the currency markets.

Speaking on Tuesday, Fed Reserve Chair Bernard Bernanke said that the Fed remained committed to the current accommodative monetary policy, which stands at $85 billion in asset purchases every month. Bernanke state that the Fed would not taper QE before it was sure that the employment picture continued to improve. Similar sentiments were expressed by Janet Yellen last week when she testified before a senate committee. Yellen is expected to take over as the new head of the Federal Reserve in January.

Over in Australia, the RBA released the minutes of its most recent policy meeting on Tuesday. The Bank noted that there was “mounting evidence” that interest rate cuts have been effective, and trotted out its customary line that it was holding rates but reserves the right to reduce rates if needed. The RBA again railed against the high value of the Australian dollar, noting that “a lower level of the exchange rate would likely be needed to achieve balanced growth in the economy”. Ironically, despite this blunt assessment about the overvalued currency, the Aussie posted respectable gains following the release of the minutes. Analysts have noted that the RBA is maintaining a mild easing bias so as to snuff out any rally by the Australian dollar.

 

AUD/USD for Wednesday, November 20, 2013

Forex Rate Graph 21/1/13

AUD/USD November 20 at 15:10 GMT

AUD/USD 0.9382 H: 0.9442 L: 0.9366

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9119 0.9229 0.9305 0.9400 0.9508 0.9613

 

  • AUD/USD has reversed directions and has lost ground in Wednesday trading. The pair dropped below the 0.94 line and remains under pressure in North American trading.
  • The pair is receiving support at 0.9305, which is protecting the 0.93 line. This is followed by support at 0.9229, which has not seen action since early September.
  • AUD/USD pair is facing resistance at the round number of 0.94. This is a weak line which has already seen action on Wednesday. It could be tested again during the North American session.
  • Current range: 0.9305 to 0.9400

 

Further levels in both directions:

  • Below: 0.9305, 0.9229, 0.9119 and 0.9000
  • Above: 0.9400, 0.9508, 0.9613, 0.9700 and 0.9823

 

OANDA’s Open Positions Ratio

AUD/USD ratio is unchanged in Wednesday trading. This is not reflected in the current movement of the pair, as the Australian dollar has sustained losses. The ratio is made up of a substantial majority of long positions, reflecting a trader bias towards the Australian dollar reversing directions and moving to higher ground.

The pair has shown some volatility this week. Traders should be prepared for this to continue during the day, with the release of key housing data out of the US as well as the minutes of the Fed’s most recent policy meeting.

 

AUD/USD Fundamentals

  • 00:00 US Federal Reserve Chairman Bernard Bernanke Speaks.
  • 00:30 RBA Assistant Governor Guy Debelle Speaks.
  • 13:30 US Core CPI. Estimate 0.1%. Actual 0.1%.
  • 13:30 US Core Retail Sales. Estimate 0.1%. Actual 0.2%.
  • 13:30 US Retail Sales. Estimate 0.1%. Actual 0.4%.
  • 13:30 US CPI. Estimate 0.0%. Actual -0.1%.
  • 15:00 US Existing Home Sales. Estimate 5.17M.
  • 15:00 US Business Inventories. Estimate 0.3%.
  • 15:00 FOMC Member William Dudley Speaks.
  • 15:30 US Crude Oil Inventories. Estimate -0.2M.
  • 17:10 FOMC Member James Bullard Speaks.
  • 19:00 US FOMC Meeting Minutes.

 

*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.