AUD/USD – Aussie Loses Ground After Stevens Comments

AUD/USD has edged higher on Wednesday, as the pair trades close to the 0.93 line early in the North American session. The pair dipped on Tuesday, following parliamentary testimony from RBA head Glenn Stevens. On the release front, Australian MI Leading Index, a minor event, posted a decline of -0.1%. In the US, today’s highlight is the Federal Reserve’s policy minutes.

RBA Governor Glenn Stevens testified before parliament on Tuesday, and managed to talk down the Australian dollar, which dipped below the 0.93 line. Stevens said that in the present economic environment, the economy needed an injection of confidence rather than lower interest rates. Stevens also warned that the risk of the Australian dollar dropping to lower levels was “underestimated”. His comments follow the minutes from its recent policy meeting, and the tone was somewhat pessimistic. Policymakers stated there was a “significant degree of uncertainty” in the economic outlook, and therefore a rate decrease is unlikely. The RBA cut its growth and inflation forecasts in July, wage growth has slowed and unemployment has climbed.

All eyes are on the Federal Reserve, which will release the minutes of its last policy meeting later on Wednesday. Traders looking for clues as to when the Fed will press the trigger and raise interest rates, but Fed chair Janet Yellen might not oblige. US growth numbers have been positive, but job data could be better and inflation remains very low. The Fed’s asset purchase program (QE) is scheduled to wind up in October, and a rate hike appears to be a question of timing.

The US economy has been moving in the right direction, but inflation numbers in the US remain at very low levels. On Tuesday, CPI and Core CPI, the primary gauges of consumer inflation, both posted paltry gains of 0.1%.  These weak readings come on the heels of PPI, a manufacturing inflation index, which also came in at 0.1% last month. Weak inflation is one reason why the Federal Reserve is in no rush to raise interest rates, as low inflation points to slack in the economy. Meanwhile, US housing numbers were sharp on Tuesday. Building Permits improved to 1.05 million, beating the estimate of 1.00 million. Housing Starts jumped to 1.09 million, easily beating the estimate of 0.97 million.

Financial leaders and central bankers from around the world will gather in Jackson Hole, Wyoming for a conference which starts on Friday. This will be Janet Yellen’s first appearance as Fed chair at the conference, and will undoubtedly be the star of the show. Yellen is expected to discuss the employment market rather than monetary policy, but the markets will be listening closely for any hints as to an interest rate hike.

 

AUD/USD for Wednesday, August 20, 2014

AUD/USD August 20 at 14:30 GMT

AUD/USD 0.9306 H: 0.9318 L: 0.9279

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9020 0.9119 0.9229 0.9361 0.9446 0.9617

 

  • AUD/USD has been showing some volatility during the day. The Australian has dollar pushed across the 0.93 line and the US dollar remains under pressure.
  • 0.9229 continues to provide strong support.
  • 0.9361 is the next resistance line. 0.9446 is next.
  • Current range: 0.9229 to 0.9361

Further levels in both directions:

  • Below: 0.9229, 0.9119, 0.9020 and 0.8916
  • Above: 0.9361, 0.9446, 0.9617 and 0.9757

 

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in short positions on Wednesday, reversing the direction we saw a day earlier. This is not consistent with the movement of the pair, as the Aussie has posted gains. The ratio has a majority of long positions, indicative of trader bias towards the Australian dollar breaking out and moving to higher ground.

 

AUD/USD Fundamentals

  • 00:30 Australian MI Leading Index. Actual -0.1%.
  • 14:30 US Crude Oil Inventories. Estimate -1.3M. Actual -4.5M.
  • 18:00 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.