The Australian dollar has had a rough week, but has steadied on Thursday, after NAB Quarterly Business Confidence posted a solid reading. The indicator dropped to -5 points in March, but bounced back sharply in the April reading, climbing to 2 points. The Aussie got a lift from the release, and crossed the 1.03 line. AUD/USD was trading in the low-1.03 range in the European session. In the US, the markets are looking for some good news from today’s key releases – Unemployment Claims and the Philly Manufacturing Index. The G20 gather in Washington for a two-day meeting which begins on Thursday.
The Australian dollar looked razor-sharp last week, climbing close to the 1.06 line. This week is a different story, as AUD/USD dropped close to two cents early in the week. There were two fundamental events which helped contribute to this sharp drop. The first was weak Chinese GDP data. The key indicator dropped from 7.9% to 7.7%, and missed the estimate of an 8.0% gain. As China is Australia’s most important market, a slowdown in the Chinese economy spells bad news for the Aussie. Second, the RBA left the door open for further interest cuts at its last policy meeting, and lower rates means the Australian currency is less attractive to foreign investors. Meanwhile, continuing weak US data is weighing on the Aussie, as nervous investors look for shelter with the safe-haven US dollar. Earlier this week, the IMF released a report on global growth, and the numbers were mostly negative. The IMF downgraded its 2013 forecast for global growth from 3.5% to 3.3%, and lowered the 2014 prediction from 4.1% to 4.0%. The report also cut its forecast on Chinese growth from 8.2% in January to 8.0%. The downgrade could affect the Australian dollar, as China is Australia’s number one trading partner.
The G20 meets on Thursday in Washington, and the slumping yen will be high on the agenda. Japan’s trading partners are very unhappy about Japan’s monetary actions, which has helped make the yen much more competitive and put a dent in their exports in the process. However, the Japanese government has deflected the criticism and continues to move full steam ahead with aggressive easing steps, which it says are aimed at stamping out deflation, not manipulating the value of the yen. The yen has now slid 15% against the US dollar in 2013, and last week came very close to the psychologically significant 100 level. G20 meetings often sugar coat any criticism aimed at one of their own members, but any statements about the high value of the yen could nonetheless affect the currency markets.
In the US, the picture is not a pretty one, as a long streak of weak economic numbers, dating back to March, continues. Building Permits dropped from 0.95 million to 0.90 million, missing the forecast of 0.94 million. Core CPI posted a weak gain of 0.1%, falling below the estimate of 0.2%. There was better news from US Housing Starts, which hit a multi-year high, improving to 1.04 million. The estimate stood at 0.93 million. The weak data points to trouble in the US economy, and if the streak continues, is bound to raise red flags in the markets about the extent of the US recovery. The markets will be hoping for better news on Thursday, as the US releases more key numbers.
AUD/USD for Thursday, April 18, 2013
AUD/USD April 18 at 12:00 GMT
1.0322 H: 1.0337 L: 1.0270
AUD/USD has edged higher in Thursday trading. The pair is receiving support at 1.0298. This is a weak line, and could be tested if the Aussie loses ground. There is stronger support at 1.0230. On the upside, we encounter resistance at 1.0350. This is followed by resistance at 1.0424.
Current range: 1.0298 to 1.0350
Further levels in both directions:
- Below: 1.0298, 1.0230 and 1.0174 and 1.01
- Above: 1.0350, 1.0424, 1.0508, 1.0568, 1.0605
OANDA’s Open Position Ratios
We continue to see strong movement in the AUD/USD ratio in the direction of long positions. This could be an early indication that the Australian dollar will change direction and post gains against the US currency. The ratio is dominated by long positions, indicative of a strong bias in favor of the pair moving upwards.
AUD/USD has settled down after some sharp losses early in the week. The US releases major employment and manufacturing data later today. If the releases surprise the markets, we could see some volatility from AUD/USD.
- 1:30 Australian NAB Quarterly Business Confidence. Actual 2 points.
- 12:30 US Unemployment Claims. Estimate 349K
- 14:00 US Philly Fed Manufacturing Index. Estimate 2.7 points
- 14:00 US CB Leading Index. Estimate 0.1%
- 14:30 US Natural Gas Storage. Estimate 35B
- Day 1 – G20 Meetings
- 16:00 US FOMC Member Sarah Bloom Raskin Speaks
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