AUD/USD – Aussie Pushes Above 94 Following Fed Statement

The Australian dollar continues to post gains and has moved above the 0.94 level on Thursday. On the release front, Unemployment Claims dipped last week, beating the estimate. We’ll get a look at the Philly Fed Manufacturing Index later in the day, with the markets expecting a softer reading in May. The sole Australian release on Thursday is the RBA Bulletin, a minor event.

The Federal Reserve continued to trim its QE program, reducing the scheme by $10 billion, to $35 billion/month. If all goes as planned, the Fed could wind up QE in the fall. The Fed also hinted that interest rates will continue to stay low for the foreseeable future, which likely means that we won’t see any rate hikes before the first quarter of 2015. With regard to economic activity, the Fed noted that the recovery is continuing, but it reduced its forecast of economic growth to 2.1-2.3%, down from an earlier forecast of around 2.9 percent. The bottom line? There were no dramatic items in the Fed statement, with one analyst describing current Fed policy as “steady as she goes”.

The news out of the US was mixed on Tuesday. Building Permits dropped to 0.99M, well below the estimate of 1.07M. On the inflation front, CPI moved up modestly, posting a gain of 0.3%. This was the strongest gain we’ve seen since January 2013. CPI followed suit, climbing to an eleven-month high. The index rose to 0.4%, beating the estimate of 0.2%. The Fed policy statement took note of the weak inflation levels, which are nowhere near the Fed’s target of 2%.

Australian Leading Indexes were listless in May, and point to a slowdown in the economy. The MI Leading Index managed a paltry gain of 0.1%, its highest level in 2014. The CB Leading Index posted a decline of 0.1%, its worst showing since last September. Australia’s key export sector is being squeezed by falling commodity prices while the high Australian dollar is making Australian goods less competitive on global markets. At the same time, consumer confidence and spending remains at very low levels. If key economic data points downward, the high-flying Aussie could lose ground.

AUD/USD for Thursday, June 19, 2014

AUD/USD June 19 at 14:05 GMT

AUD/USD 0.9419 H: 0.9432 L: 0.9396

AUD/USD Technical

• AUD/USD has posted slight gains in Thursday trade.
• 0.9361 has reverted to a support role as the Aussie pushes higher.
• 0.9446 is a weak resistance line and could face pressure during the day. 0.9617 is stronger.

Further levels in both directions:

• Below: 0.9361, 0.9229, 0.9119 and 0.9000
• Above: 0.9446, 0.9617, 0.9757 and 0.9847

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in short positions on Thursday, reversing the direction on the previous day. This is not consistent with the movement of the pair, as the Australian dollar has posted modest gains. The ratio has a majority of short positions, indicative of trader bias towards the US dollar reversing directions and moving higher.

AUD/USD is trading above the 0.94 line on Thursday. The pair is unchanged in the North American session.

AUD/USD Fundamentals

• 5:30 RBA Bulletin.
• 12:30 US Unemployment Claims. Estimate 316K.
• 14:00 US Philly Fed Manufacturing Index. Estimate 14.3 points.
• 14:00 US CB Leading Index. Estimate 0.6%.
• 14:30 US Natural Gas Storage. Estimate 112B.

*Key releases are highlighted in bold

*All release times are GMT

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