AUD/USD edged lower in Thursday trading, despite some positive Australian releases. The pair was trading in the low-1.04 range. Retail Sales and Building Approvals, both key releases, beat market expectations. The big news of the day was the Japanese yen, which took a hit after the Bank of Japan surprised the markets with some aggressive monetary easing measures. In the US, Unemployment Claims continued a string of weak releases, as the key indicator was much higher than anticipated.
Australia continues to post strong data, after a solid Trade Balance reading on Wednesday. Building Approvals shook off two consecutive declines, and gained an impressive 3.1%. This was well above the estimate of 2.4%. There was more good news from Retail Sales, which climbed 1.3%. This blew away the estimate of a 0.3% gain. Despite the positive numbers, the Australian dollar has posted modest losses against the US currency, as the pair was trading slightly above the 1.04 level.
Today’s major story was the BOJ policy meeting. Throughout the week, the yen was firm, as speculation grew that the BOJ would not take any aggressive action at Thursday’s policy meeting, the first under new BOJ Governor Haruhiko Kuroda. The Japanese currency showed some muscle, as USD/JPY dipped below the 93 level. However, the tables were turned on Thursday as the BOJ surprised everyone with aggressive easing steps. The measures include expanding QE to include riskier assets such as ETFs (exchange traded funds) and real estate investment funds. As well, the BOJ will purchase longer-term government bonds, a move aimed at pushing down longer-term interest rates to coax businesses to borrow (and spend) more. The BOJ stated that it plans to boost the monetary base by JPY60-70 trillion each year, reaching JPY270 trillion by the end of 2014. The news led to a surge by the US dollar against the yen, with USD/JPY jumping to the mid-95 range.
The drama and uncertainty in Cyprus, one of the Eurozone’s smallest members, continues, even though a bailout plan has been accepted by all sides. Strict capital controls are still in place in Cyprus in order to prevent a run on the banks. Under the bailout agreement, bank deposits below EUR1000,000 are safe, but larger accounts with the Bank of Cyprus will be facing a haircut of up to 60%. An amount of 37.5% of these deposits will be converted into bank shares, and up to 22.5% more could be grabbed in order to prop up the Bank of Cyprus’ reserves. This steep tax is expected to have a strong negative impact on the country’s business sector, and the government has admitted that the country is in recession. In order to help the ailing economy, the government plans to lift a ban on casinos and provide tax exemptions on business profits that are reinvested on the island. President Nicos Anastasiades has acknowledged that the bailout agreement is a bitter pill for Cypriots, but said that refusing the agreement would have meant the collapse of the banking sector and could have led to Cyprus’ exit from the Eurozone. In a dramatic development, Cyprus finance minister Michael Sarris has resigned. His resignation comes as Cyprus initiates a formal investigation to examine the events which lead to the EUR10 billion bailout.
In the US, there is concern about a steady string of weak data. Last week saw a host of dismal US releases, as manufacturing, housing, consumer confidence and employment figures all fell below expectations. The bad news has continued into April, as PMIs and the ADP Non-Farm Employment Change were way below the estimates. The markets were hoping for better news from Unemployment Claims, but there was no relief, as the key employment indicator hit its highest level since November 2012. There were 385 thousand new claims, way above the estimate of 352 thousand. The US has now posted two straight weeks of disappointing numbers from a wide range of sectors, casting doubts on the extent of the US recovery.
AUD/USD for Thursday, April 4, 2013
AUD/USD April 4 at 12:30 GMT
1.0414 H: 1.0490 L: 1.0403
AUD/USD has edged lower in Thursday trading. The pair is facing resistance at 1.0424. This is a weak line, and could face further activity. There is stronger resistance at 1.0497, which is protecting the 1.05 level. On the downside, the pair is receiving support at 1.0334. This is followed by a support level at 1.0230. This line 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 and 1.0080
- Above: 1.0424, 1.0497, 1.0568, 1.0605 and 1.0697
OANDA’s Open Position Ratios
The AUD/USD ratio is pointing to movement towards long positions. We are not seeing this reflected in the current movement of the pair, as the Aussie has edged lower in Thursday trading. However, the ratio activity could be a precursor to a correction in the downward trend, with traders expecting the Australian dollar improve.
AUD/USD has weakened despite some positive key releases on Wednesday and Thursday. We could see the Aussie recover once the markets recover from the shock of the BOJ meeting which sent the Japanese yen reeling. As well, the US releases key employment data later today, which could affect the direction of AUD/USD.
- 00:30 Australian Building Approvals. Estimate 2.4%. Actual 3.1%
- 00:30 Australian Retail Sales. Estimate 0.3%. Actual 1.3%
- 11:30 US Challenger Job Cuts. Actual 30%.
- 12:30 US Unemployment Claims. Estimate 352K. Actual 385K.
- 12:45 US FOMC Member Charles Evan Speaks
- 14:30 US Fed Chairman Bernard Bernanke Speaks
- 14:30 US Natural Gas Storage. Estimate -89B
- 16:30 US FOMC Member Esther George Speaks
- 21:00 US FOMC Member Janet Yellen Speaks
*Key releases are highlighted in bold
*All release times are GMT
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