The Australian dollar continues to spiral downwards, and is proving no match for the surging US dollar. On Wednesday, AUD/USD fell to a three-year low, as the pair dropped below the 0.91 level. In economic news, Australian retail sales and housing data disappointed, but Trade Balance improved. The Australian dollar got no help from Chinese data, as the Non-manufacturing PMI came in below the estimate.
Wednesday’s economic releases were of no help for the beleaguered Australian dollar. HIA New Home Sales rose 1.6%, well below the 3.9% gain in the previous release. Retail Sales, a key indicator, posted a weak gain of just 0.1%, falling short of the estimate of 0.4%. There was better news from Trade Balance, as the monthly surplus improved to AUD 0.67 billion, its highest level since February 2012. This surpassed the estimate of AUD 0.05 billion. In China, Non-Manufacturing PMI dropped to 53.9 points, its lowest level since March 2012. The Aussie is sensitive to Chinese data, as the Asian giant is Australia’s number one trading partner.
There were no surprises from the RBA, which kept interest rates pegged at 2.75% for the third straight month. In its accompanying rate statement, the central bank maintained its easing bias, noting that inflation remains within the RBA’s target, leaving room for further cuts if needed. The RBA added that although the Australian dollar has depreciated by 10% in the past few months, it remains high, and a lower level would help provide a “rebalancing” of economic growth. On Wednesday, RBA Governor Glenn Stevens noted that the Reserve Bank Board “deliberated for a very long time” before deciding to maintain interest rate levels. Predictably, the markets are taking this as a sign that we could see rate reductions in the near future, and this is likely to weigh on the Aussie.
Global growth has been sputtering for some time, and there was more bad news on Friday, as an HSBC report downgraded its forecast for global growth. Global GDP was cut from 2.8% to 2.0% in 2013, and from 3.1% to 2.6% in 2014. In its report, HSBC said that it had lowered its forecast due to the US Federal Reserve decision to cut QE, as well as a sharp slowdown in China and other emerging countries such as India and Brazil. The report also revised China’s GDP from 8.2% to 7.4% for 2013 and from 8.4% to 7.4% for next year. Weaker global growth will be bad news for countries which heavily depend on exports, such as Japan, Canada and Australia, and this could have a negative impact on these countries’ currencies.
AUD/USD for Wednesday, July 3, 2013
AUD/USD July 3 at 12:25 GMT
AUD/USD 0.9082 H: 0.9190 L: 0.9052
AUD/USD continues to lose ground on Wednesday, and finds itself in 0.90 territory. The pair is receiving weak support at 0.9071. This line could break if the pair’s downward spiral continues. This is followed by the psychologically significant 0.90 line, which has held firm since September 2010. On the upside, the pair faces resistance at 0.9135. There is stronger resistance at 0.9221.
- Current range: 0.9071 to 0.9135
Further levels in both directions:
- Below: 0.9071, 0.9000, 0.8916 and 0.8747
- Above: 0.9135, 0.9221, 0.9328, 0.9405, 0.9541 and 0.9651
OANDA’s Open Positions Ratio
AUD/USD ratio has again reversed direction and is pointing to movement towards long positions. This is not reflected in the pair’s current movement, as the US dollar continues to chip away at the Aussie. The ratio continues to be dominated by long positions, indicating a strong trader bias towards the Australian dollar recovering and moving higher.
AUD/USD continues to struggle, after weak domestic and Chinese releases. We could see further movement from the pair on Wednesday, as the US releases four major events later today.
- 1:00 Australian HIA News Home Sales. Actual 1.6%.
- 1:30 Australian Retail Sales. Estimate 0.4%. Actual 0.1%.
- 1:30 Australian Trade Balance. Estimate 0.05B. Actual 0.67B.
- 2:55 RBA Governor Glenn Stevens Speaks.
- 11:30 US Challenger Job Cuts.
- 12:15 US ADP Non-Farm Employment Change. Estimate 161K.
- 12:30 US Trade Balance. Estimate -40.3B.
- 12:30 US Unemployment Claims. Estimate 345K.
- 14:00 US ISM Non-Manufacturing PMI. Estimate 54.3 points.
- 14:00 US Treasury Secretary Jack Lew Speaks.
- 14:30 US Crude Oil Inventories. Estimate -2.6M.
- 16:00 US Natural Gas Storage. Estimate 75B.
*Key releases are highlighted in bold
*All release times are GMT