AUD/USD – No Relief as Aussie Slump Continues

The Australian dollar continues to slip and slide against its US cousin. AUD/USD has again dipped below the 0.95 level in Friday trading. The pair has now fallen to its lowest levels since October 2011.  There was yet another weak Australian release on Thursday, as Trade Balance came up short of expectations. The country posted another surplus, but it was a very modest AUD 0.03B, which was well below the estimate of AUD 0.20 billion. In the US, Unemployment Claims improved, and almost matched the forecast. On Friday, the US releases two major employment events – Non-Farm Payrolls and the Unemployment Rate. There are no Australian releases on Friday.

The Aussie continues it free-fall, as the currency has lost almost nine cents since the beginning of May. Nothing seems to be going right for the Australian dollar. The RBA did not lower rates earlier this week, but the Australian dollar still took a hit, as the RBA left the door open for rate cuts in the near future. The economy churned out more weak numbers this week, as three key events – Retail Sales, GDP and Trade Balance all missed their estimates.  There was more bleak news on Thursday, as BlackRock, the world’s largest issuer of exchange traded funds, said that a number of U.S. hedge funds are lining up to short the struggling Australian dollar.

The markets continue to have trouble figuring out the direction of the US economy. The US continues to post mixed numbers, and on Wednesday, ADP Non-Farm Payrolls looked sluggish. The key indicator has struggled, and has now missed the estimate for three consecutive releases. The indicator came in at 135 thousand, well off the forecast of 171 thousand. However, Unemployment Claims bounced back, posting a reading of 346 thousand, very close to the estimate of 345 thousand. We’ll get a clearer picture of the employment picture later today, as the US releases the Unemployment Rate and Non-Farm Payrolls.

Will the Federal Reserve scale back QE? Although the Fed hasn’t made any changes so far, Fed policymakers, including Fed Chair Bernanke, continue to hint that QE could be scaled back in the next few months. With the US continuing to alternate between good and bad economic releases, the Fed may continue to hold off on any changes to QE before it is convinced that the US economy is improving. The Fed has repeatedly stated that it wants to see an improvement in the labor picture before taking any action, so Friday’s key employment releases could play a major role in what action, if any, the Fed takes with regard to QE.

AUD/USD for Friday, June 7, 2013

AUD/USD June 7 at 10:30 GMT

AUD/USD 0.9504 H: 0.9504 L: 0.9466

AUD/USD Technical

AUD/USD continues to tumble, and is struggling to remain above the 0.95 level. On the upside, the pair faces resistance at 0.9541. This is followed by a stronger line at 0.9651. On the downside, the pair is receiving support at 0.9405. This line has held firm since October 2011, but given the volatility of the pair, it cannot be considered a safe line. It is followed by a support line at 0.9328.

• Current range: 0.9405 to 0.9541

Further levels in both directions:

• Below: 0.9405, 93.28, 92.21 and 0.9071
• Above: 0.9541, o.9651, 0.9727, 0.9795 and 0.9907

OANDA’s Open Positions Ratio

AUD/USD ratio is showing almost no change in the Friday session. Currently the pair continues to lose ground, as it has for most of the week. If AUD/USD continues its strong movement, we can expect the ratio to swing back into action.

The Australian dollar continues to struggle, and has had a terrible week, as June has not brought any relief to the currency. Will the downward trend continue? We could see more volatility from the pair, as the US releases two key employment events.

AUD/USD Fundamentals

• 12:30 US Non-Farm Employment Change. Estimate 167K.
• 12:30 US Unemployment Rate. Estimate 7.5%.
• 12:30 US Average Hourly Earnings. Estimate 0.2%.
• 19:00 US Consumer Credit. Estimate 13.4B.

*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.