AUD/USD – Slight Losses As Retail Sales Dips

AUD/USD has edged lower on Wednesday after strong gains a day earlier. Early in the North American session, the pair is trading in the mid-0.93 range. On the release front, Australian Retail Sales fell short of expectations. In the US, Federal Reserve chair Janet Yellen will testify before Congress on Wednesday and Thursday, and her remarks could move the markets.

The Federal Reserve will be at center stage on Wednesday as Janet Yellen testifies before the Joint Economic Committee of Congress. Although recent employment data has been positive, Yellen has sounded cautious about the health of the economy, and if she reiterates these sentiments before Congress, we could see the dollar lose some ground. Meanwhile, the Federal Reserve trimmed its QE program by $10 billion last week. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a “considerable time” after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.

Australian Retail Sales is the primary gauge of consumer spending, and the indicator disappointed in April, dropping to 0.1%. This fell short of the estimate of 0.4%, and is a cause for concern, as weak consumer spending could hurt the fragile Australian economy. We’ll get a look at Employment Change, one of the most important economic indicators, early on Thursday.

As expected, the RBA continued its low-rate monetary policy on Tuesday, as it maintained rates at 2.50%. Although RBA Governor Glenn Stevens remarked that the Australian dollar remains high by “historical standards”, the Aussie posted gains and crossed above the 0.93 level. In other news, Australian Trade Balance slipped to $0.73 billion, well off the estimate of $1.10 billion. Building Approvals posted a decline of 3.5%, well off the estimate of a gain of 1.3%. The indicator continues to struggle, with just one gain since last October.

AUD/USD for Wednesday, May 7, 2014

AUD/USD May 7 at 13:10 GMT

AUD/USD 0.9326 H: 0.9355 L: 0.9224

AUD/USD Technical

• AUD/USD has edged lower on Wednesday, as the pair remains above the 0.93 line.
• 0.9229 is providing strong support.
• On the upside, 0.9361 remains a weak line. There is stronger resistance at 0.9446.
• Current range: 0.9229 to 0.9361.

Further levels in both directions:

• Below: 0.9229, 0.9119, 0.9000 and 0.8893
• Above: 0.9361, 0.9446, 0.9542, 0.9617 and 0.9703

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in short positions in Wednesday trading, reversing the direction seen a day earlier. This is consistent with the movement of the pair, as the Australian dollar has posted slight losses. The ratio has a majority of long positions, indicative of trader bias towards the Australian dollar resuming its upward movement.

AUD/USD has edged lower on Wednesday. The pair is steady early in the North American session.

AUD/USD Fundamentals

• 1:30 Australian Retail Sales. Estimate 0.4%. Actual 0.1%.
• 12:30 US Preliminary Nonfarm Productivity. Estimate -0.9%.
• 12:30 US Preliminary Unit Labor Costs. Estimate 2.3%.
• 14:00 Federal Reserve Chair Janet Yellen Testifies Before Joint Economic Committee of Congress.
• 14:30 US Crude Oil Inventories. Estimate 0.9M.
• 17:01 US 10-year Bond Auction.
• 19:00 US Consumer Credit. Estimate 15.4B.

*Key releases are highlighted in bold

*All release times are GMT

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