AUD/USD – Edges Lower on Cyprus Concerns

AUD/USD has edged lower in Wednesday trading, reversing the pair’s upward movement which we have seen this week. The pair was trading in the 1.0430 range. The markets continue to be jittery despite the Cyprus bailout agreement, which has not spelled out the extent of the tax on large bank deposits. In Australia, the RBA released its biannual Financial Stability Review and expressed concern about the effect of the Cyprus bailout crisis on global markets, as well as noting that the high Australian dollar is having a negative impact on the business sector. MI Inflation Gauge will be released late Wednesday, and the markets will be hoping to see a reading above February’s 0.0% release. In the US, Tuesday’s releases were generally disappointing, as Core Durable Goods, Consumer Confidence and New Home Sales all missed their estimates. The markets will be hoping for better news as Pending Home Sales is released later today.

The new Bank of Japan Governor, Haruhiko Kuroda, continues to make headlines, as the markets seem to be hanging on every word of his. What happens at the BOJ is very important to Australia, as Japan is Australia’s number two trading partner, after China. Kuroda has made no secret of his plans to implement further monetary easing, although he has been short on specifics. On Tuesday , Kuroda revealed a few of his closely-held cards and stated that the BOJ will consider abolishing a rule which limits the amount of government bonds that the BOJ is permitted to purchase. Further, the central bank will discuss extending the maturity of such bonds from the current three years to five years. So we could see some important developments at next week’s BOJ policy meeting, and with it some movement in AUD/USD.

Last week’s crisis over the Cyprus bailout agreement reached a fever pitch, and there was even talk that the island country might exit the Eurozone if the ECB carried out its threat to cut off emergency funds. Although a new bailout agreement was reached on Monday, the lack of details has left the markets wary. With a lingering fear of a bank run in Cyprus, all banks throughout the country will remain closed until Thursday. The size of the haircut imposed on accounts larger than 100,000 euros is still not clear.  Meanwhile, the head of the Eurogroup, Dutch finance minister Jeroen Dijsselbloem, stated that the Cyprus deal could serve as a template for future bank restructurings in the Eurozone. Dijsselbloem later backtracked on these comments, but his ill-timed remarks have likely made holders of large deposits in other zone countries even more jittery.

With recent US numbers pointing upwards, there has been a lot of talk of the US recovery deepening. However, Tuesday’s major releases point to continued weakness in housing, consumer confidence and manufacturing. Core Durable Goods Orders posted its first decline since last September, dropping 0.5%. The markets had expected a 0.7% gain. CB Consumer Confidence failed to repeat February’s excellent numbers, dropping from 69.6 points to 59.7 points, way below the estimate of 67.9 points. New Home Sales also declined, coming in at 411 thousand, well of the forecast of 426 thousand. The US will have to produce better data from its key releases to convince the market that the recovery is deepening and that the economy is indeed headed in the right direction.

 

AUD/USD for Wednesday, March 27, 2013

Forex Rate Graph 21/1/13
 

AUD/USD March 27 at 12:50 GMT

1.0435 H: 1.0482 L: 1.0429

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
1.0230 1.0334 1.0424 1.0497 1.0568 1.0605

 

After making steady progress this week, AUD/USD has edged lower. The pair is receiving support at 1.0424. This is a weak line, and could be tested if the current downward momentum continues. 1.0334 is a stronger support level. On the upside, 1.0497 is providing resistance. This line has strengthened as the pair trades closer to the 1.04 level.

  • Current range: 1.0424 to 1.0497

 

Further levels in both directions:

  • Below: 1.0424, 1.0334, 1.0230, 1.0174, 1.0080 and 1.00
  • Above: 1.0497, 1.0568, 1.0605, 1.0697 and 1.0753

 

OANDA’s Open Position Ratios

The AUD/USD ratio remains quiet, and is showing little movement in Wednesday trading. Although the Aussie has edged lower, we are not currently seeing significant movement from the pair. We continue to see a close split between short and long positions, indicating that trader sentiment is divided as to what direction AUD/USD will take.

After some respectable gains over the past week by AUD/USD, Wednesday’s trend is southward. The Aussie continues to be affected by the Cyprus crisis, and we could see some increased movement from the pair as the US releases key housing data on Wednesday.

 

AUD/USD Fundamentals

  • 00:30 Australian RBA Financial Stability Review
  • 14:00 US Pending Home Sales. Estimate -0.3%
  • 14:30 US Crude Oil Inventories. Estimate 1.5M
  • 15:00 US FOMC Member Charles Evans Speaks
  • 15:30 US FOMC Member Eric Rosengren Speaks
  • 23:30 Australian MI Inflation Gauge

 

*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.