AUD/USD – Aussie Under Pressure as Markets Mull Rate Cut

The Australian dollar tumbled last week, coughing up two cents against the surging US dollar. The Aussie has stabilized as we start the new trading week, but remains under pressure, as AUD/USD trades in the mid-0.91 range. In economic news, it’s a quiet start to the week, with just two releases on the schedule. In the US, the markets are expecting a strong gain from Pending Home Sales after four consecutive declines. In Australia, RBA Deputy Governor Philip Lowe will speak at an event in Sydney.

There was positive news on the US employment front, as Unemployment Claims dropped to 323 thousand, a seven-week low. This was well below the estimate of 333 thousand. The strong figure will likely increase speculation as to when the Fed will step in and taper QE, although such a dramatic move is not considered likely before early 2014.

Low inflation indicators have been a major concern in Japan and the Eurozone, and the US economy is not immune from this problem. The Producer Price Index continues to look weak, posting a decline of 0.2% in October. This was the index’s second straight decline. Core CPI showed a weak gain of 0.1%, and CPI dipped to -0.1%. These weak numbers point to slow economic activity and slow economic growth in the US.

Last week, the RBA released the minutes of its most recent policy meeting. 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”. The Aussie had a poor week, but there is talk that the RBA may have to pull out some heavy artillery and reduce rates if it wants to see the currency under the 0.90 level.

AUD/USD for Monday, November 25, 2013

AUD/USD November 25 at 13:50 GMT

AUD/USD 0.9154 H: 0.9188 L: 0.9120

AUD/USD Technical

• AUD/USD is steady in Monday trading. The pair dropped to a low of 0.9120 early in the European session, but has moved higher.
• The pair is receiving support at 0.9119. Given the pair’s recent downward movement, it cannot be considered a strong line. This is followed by support at the key level of 0.9000, which has remained intact since early September.
• AUD/USD pair is facing resistance at 0.9229. This is followed by resistance line at 0.9305.
• Current range: 0.9119 to 0.9229

Further levels in both directions:

• Below: 0.9229, 0.9119, 0.9000, 0.8893 and 0.8735.
• Above: 0.9305, 0.9400, 0.9508, 0.9613, 0.9700 and 0.9823

OANDA’s Open Positions Ratio

AUD/USD is unchanged in Monday trading. This is reflected in the current movement of the pair, which is not showing much movement on Monday. The ratio is made up of a substantial majority of long positions, reflecting a trader bias towards the Australian dollar moving to higher ground.

The pair has settled down after sharp drops last week. With the US releasing key home data later in the day, we could see some volatility from AUD/USD.

AUD/USD Fundamentals

• 15:00 US Pending Home Sales. Estimate 2.2%.
• 22:15 RBA Governor Deputy Governor Philip Lowe Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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