AUD/USD – Loses Ground on Cyprus Worries, Weak US Employment Data

AUD/USD continues to lose ground, as the pair trades slightly above the 1.04 line in Thursday’s European session. The Cyprus situation continues to weigh on the markets, and US data continues to look sluggish, as Unemployment Claims was way above the estimate. This has resulted in the Australian dollar, which is considered a risk currency, taking a hit, as nervous investors seek the safety of the US currency. In Australia, Private Sector Credit was unchanged, posting a gain of 0.2%. This was shy of the estimate of 0.3%.

After a frantic week of negotiations over a bailout between Cyprus, the EU and the IMF, a bailout agreement was announced on Monday, but the markets remain jittery. The agreement has not brought calm to the small Eurozone member, which has been at the center of a financial crisis over the EUR10 billion bailout. The country’s banks are scheduled to reopen on Thursday, after being closed for business for almost two weeks. Fearing a bank run, the government has imposed strict controls, including limiting withdrawals to 300 euros a day, and a ban on cashing checks. The size of the haircut which will be imposed on accounts of over 100,000 euros is still unknown, and there are rumors that these depositors could lose up to 40% of their savings. The euro has taken a hit over the crisis, dropping over two cents against the dollar this week.

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.

There has been a lot of talk of the US recovery deepening, but this week has been a disappointment, as economic releases point to continued weakness across a wide range of sectors. The markets had hoped for strong housing numbers this week, but two major housing releases were weak. New Home Sales fell sharply from 437 thousand to 411 thousand, well below expectations. Pending Home Sales also looked weak, declining 0.4%. The forecast stood at -0.3%. The news was no better from Unemployment Claims, which has enjoyed a run of readings that were below expectations. This time around, the key employment indicator hit a five-week high, at 357 thousand news claims. This was way above the estimate of 340 thousand. The weak US numbers have raised concerns about the global economy, and this has contributed to losses by the Australian dollar.

 

 AUD/USD for Thursday, March 28, 2013

Forex Rate Graph 21/1/13
 

AUD/USD March 28 at 12:55 GMT

1.0405: 1.0457 L: 1.0401

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
1.0174 1.0230 1.0334 1.0424 1.0497 1.0568

 

AUD/USD continues to weaken, and is testing the 1.04 level. The pair is facing resistance at 1.0424. This weak line could face more activity if the pair reverses direction. There is stronger resistance at 1.0497. On the downside, 1.0334 is providing support. This is followed by 1.0230, which has remained intact since mid-March.

Current range: 1.0334 to 1.0424

Further levels in both directions:

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

 

OANDA’s Open Position Ratios

The AUD/USD ratio is pointing to movement towards long positions. This is not reflected in the current movement of the pair, as the Aussie continues on a downward trend. The ratio has a slight majority of long postions, indicating that trader sentiment is split regarding which direction AUD/USD is expected to take.

AUD/USD has had a busy week. After climbing close to the 1.05 line, the pair has retracted and finds itself struggling to stay in 1.04 territory. Will the downward trend continue? If the Cyprus crisis continues to spook the markets, we can expect more pressure on the Australian dollar. With the Australian markets closed on Friday, we may see some subdued acitivity from the pair right up to the end of the trading week.

 

AUD/USD Fundamentals

  • 00:30 Australian Private Sector Credit. Estimate 0.3%. Actual 0.2%
  • 12:30 US Unemployment Claims. Estimate 340K
  • 12:30 US Final GDP. Estimate 0.5%
  • 12:30 US Final GDP Price Index. Estimate 0.9%
  • 13:45 US Chicago PMI. Estimate 56.5 points
  • 14:30 US Natural Gas Storage. Estimate -85B

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.