AUD / USD – Edges Higher as Aussie GDP Remains Steady

AUD/USD has edged higher in Wednesday trading, as the pair was trading in the high-1.02 range. The pair edged higher in the Asian session after the release of Australian GDP, and touched above the 1.03 level. However, it soon retracted back into 1.02 territory. There are two Australian releases scheduled for later today – AIG Construction Index and Trade Balance. In the US, today’s major release is ADP Non-Farm Payrolls.

After a slow start to the week, the Australian dollar has posted some gains, and gained closed to a cent against the US dollar since the start of the week. The Aussie has taken advantage of some solid releases in the past few days. AIG Services Index, although still under the 50-point level, posted sharp gains in February. Retail Sales sparkled, jumping 0.9%, its best showing since August 2012. Current Account pointed to a smaller deficit, and the RBA Cash Rate remained at 3.00%. On Wednesday, GDP came in at 0.6%, matching the forecast. The markets are hoping that the positive news continues, with the release of Trade Balance later on Wednesday. 

In Japan, Haruhiko Kuroda, who is expected to become the new governor of the BOJ later this month, testified at a confirmation hearing in Japan’s lower house of parliament. Kuroda is a proponent of strong monetary measures to kick-start the economy, and has stated that the central bank should consider purchasing more Japanese government bonds. Some analysts feel that this could cause a market bubble, with one expert warning that the BOJ’s options are limited, and that Kuroda will face a “wall of reality” when he takes the helm of the BOJ later this month. Regarding inflation, Kuroda said that the BOJ’s current policies were not strong enough to boost inflation to the government’s target of 2%. Kuroda suggested that the BOJ consider commencing its open-ended asset purchases before the scheduled start of 2014. He took pains to note that the BOJ is not targeting the yen, which has lost 12% of its value against the dollar in the past 3 months, and has antagonized Japan’s trading partners.

Back in the US, Janet Yellen, vice-chair of the US Federal Reserve, underscored the Federal Reserve’s intent to continue its current QE program and ultra-low interest rates. Yellen said that she hoped that the low interest rates would facilitate a “return to prudent risk-taking”. The current round of QE involves the purchase of $85 billion in assets each month, and critics have expressed the fear that this could lead to “asset bubbles”. However, both Fed Chair Bernanke and Yellen have argued that the benefits of a stronger recovery outweigh any such risks. Defending the Fed’s asset purchases, Yellen cited a study which found that when the central bank purchases $500 billion in bonds, unemployment drops a quarter of a percentage point within three years. Yellen’s remarks come on the heels of Bernanke’s testimony on Capitol Hill, where he also defended the Fed’s monetary policy.

 

AUD/USD for Wednesday, March 6, 2013

Forex Rate Graph 21/1/13
 

AUD/USD March 6 at 13:00 GMT

1.0282  H: 1.0301 L: 1.0259

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
1.0080 1.0174 1.0230 1.0334 1.0424 1.0568

 

AUD/USD continues to edge higher and is within striking distance of the 1.03 level. The pair is facing resistance at 1.0334. This is followed by resistance at 1.0424. This line has held firm since early February.  On the downside, there is support at 1.0230. This is followed by 1.0174. This line has strengthened as the pair trades at higher levels. 

Current range: 1.0230 to 1.0334

Further levels in both directions:

  • Below: 1.0230, 1.0174, 1.0080, 1.00, 0.9948 and 0.9858
  • Above: 1.0334, 1.0424, 1.0568 and 1.0605

 

OANDA’s Open Position Ratios

The AUD/USD ratio remains quiet, after pointing to movement towards short positions on Tuesday. This is not in line with what we are currently seeing from the pair, as the Aussie has been posting gains over the past couple of days. We could see the ratio swing back into action at any time. Trader sentiment favors long positions, indicating a bias towards the Australian dollar continuing to post gains against the US currency.

AUD/USD is enjoying an upward trend, and we could see the 1.03 line face pressure. Will the momentum continue? Australian Trade Balance will be released later on Wednesday, and this key indicator could well be a market-mover.

 

AUD/USD Fundamentals

  • 13:15 US ADP Non-Farm Employment Change. Exp. 172K
  • 15:00 US Factory Orders. Estimate -2.2%
  • 15:30 US Crude Oil Inventories. Estimate 0.9M
  • 19:00 US Beige Book.
  • 17:30 Australian AIG Construction Index
  • 19:30 Australian Trade Balance. Estimate 0.51B

 

*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.
Kenny Fisher

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