AUD/USD – Aussie Slips Below 90 After RBA Minutes

The Australian dollar briefly dipped below the 90 level on Tuesday, as AUD/USD dropped to its lowest level since March. Late in the European session, the pair is trading in the mid-0.90 range. On the release front, the RBA minutes stated that interest rates would remain at current levels and that the Australian dollar was overvalued. In the US, inflation numbers remain soft, as PPI came in at 0.0% last month.

The RBA minutes contained no surprises, as the minutes focused on interest rate levels and the value of the Australian dollar. The RBA said that rate levels would remain unchanged and took a swipe at the Aussie, noting that the exchange rate remains “above most estimates of its fundamental value.” There was further pressure on the currency as RBA Assistant Governor Christopher Kent said on Tuesday that a decline in the Australian dollar would increase demand for local producers. Perhaps the RBA policymakers are in a better mood this week, following the Aussie’s losses of over 300 points against the US dollar.

US inflation indicators remain soft, as underscored by weak manufacturing inflation numbers in August. PPI, a key event, dipped to just 0.0%, a 3-month low. The estimate stood at 0.1%. Core PPI slipped to 0.1%, down from 0.2% a month earlier. This matched the forecast. We’ll get a look at consumer inflation numbers on Wednesday, with the release of Core CPI and CPI.

US numbers wrapped up last week on a high note. Core Retail Sales improved to 0.3%, edging above the estimate of 0.2%. Retail Sales posted a nice gain of 0.6%, well above the estimate of 0.3%. There was excellent news from the UoM Consumer Sentiment, which bounced back from a weak reading in July and improved to 84.6 points, its best showing since November 2012. The forecast stood at 83.2 points. These indicators point to an increase in consumer confidence and spending, which underscore a deepening economic recovery.

Australian employment numbers made headlines last week, as Employment Change posted an incredible gain of 121,000 last month, crushing the estimate of 15,000. The markets are having some difficulty accepting these stratospheric figures at face value, with one Australian analyst noting that the numbers are “somewhat difficult to interpret”. The Australian statistics bureau claimed that a rotation in its survey group affected the August figures. There were no doubts about the veracity of the unemployment rate, which dipped to 6.1%, beating the estimate of 6.3%. The Aussie posted gains after the employment releases but then retracted and continued to head southward.

Confidence in the Australian economy appears to be waning, according to the latest business and consumer confidence data. Westpac Consumer Sentiment had been steadily improving, but the upswing came to a crashing halt as the indicator slipped by 4.6% in August. This marked a 4-month low. NAB Business Confidence, a key indicator, slipped to 8 points in August, compared to 11 points a month earlier. Weak business and consumer confidence in Australia’s economy could translate into decreased spending by consumers and businesses, which would be grim news for the sputtering economy.

 

AUD/USD for Tuesday, September 16, 2014

AUD/USD September 16 at 13:30 GMT

AUD/USD 0.9038 H: 0.9054 L: 0.8989

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.8820 0.8953 0.9020 0.9119 0.9229 0.9361

 

  • AUD/USD lost ground in the Asian session, breaking below the 0.9020 line and dipping into 89 territory. The pair recovered in European trading.
  • 0.9020 remains an immediate support level. 0.8953 is stronger.
  • On the upside, 0.9119 is a strong resistance line.
  • Current range: 0.9020 to 0.9119

Further levels in both directions:

  • Below: 0.9020, 0.8953, 0.8820 and 0.8860
  • Above: 0.9119, 0.9229, 0.9361, 0.9446 and 0.9617

 

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged on Tuesday. This is consistent with the pair’s current lack of movement. The ratio continues to have a majority of short positions, indicative of trader bias towards the US  dollar breaking out and moving higher.

 

AUD/USD Fundamentals

  • 00:00 RBA Assistant Governor Christopher Kent Speaks.
  • 1:30 RBA Monetary Policy Meeting Minutes.
  • 12:30 US PPI. Estimate 0.1%. Actual 0.0%.
  • 12:30 US Core PPI. Estimate 0.1%. Actual 0.1%.
  • 20:00 US TIC Long-Term Purchases. Estimate 24.3B.

* 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.