The Australian dollar has steadied in Thursday trading. AUD/USD is trading in the low-0.91 range in the European session. The pair continues to trade at multi-year lows, as the psychologically important 0.90 level looms closer. In economic news, Australian Building Approvals posted a decline and missed the estimate. We can expect thin trading during the day, as the US markets are closed for the July 4th holiday.
Australian Building Approvals, the last major Australian release of the week, continues to alternate between solid and weak readings. This tends to make accurate predictions a tricky task, but the markets did a good job with this month’s forecast. After a superb gain of 9.1% in June, the July reading slumped to -1.1%. This was close to the estimate of -0.9%, and so the Aussie has not reacted to this release.
There were no surprises from the RBA, this week, 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.
The Australian dollar has looked brutal, shedding 10% of its value since April. The currency has been crowned with the dubious title of the worst-performing major currency over the past three months. Will the Aussie continue to drop? The major banks seem to think so. Credit Suisse, for example, predicts that the currency will drop to 87 US cents by October, and will hit 75 cents within a year. If the Aussie doesn’t cooperate on its own, the RBA, which reiterated earlier in the week that the currency is overvalued, could step in and lower interest rates. So the near future doesn’t look very rosy for the struggling Aussie.
Over in the US , the markets had plenty of data to sift through on Wednesday, as the US released four key events. The always important employment numbers looked solid. ADP Non-Farm Payrolls, an unofficial release which precedes Friday’s government release, posted a gain of 188 thousand, its best showing since March. The estimate stood at 161 thousand. Unemployment Claims, released ahead of the July 4th holiday, came in at 343 thousand, slightly below the estimate of 345 thousand. The US continues to churn out larger trade deficits, as the July release came in at -$45.0 billion, much higher than the estimate of $-40.3 billion. Finally, the ISM Non-Manufacturing PMI looked weak, dropping from 53.7 points to 52.2 points. This was well short of the estimate of 54.3 points.
AUD/USD for Thursday, July 4, 2013
AUD/USD July 4 at 11:50 GMT
AUD/USD 0.9120 H: 0.9144 L: 0.9074
AUD/USD is showing little movement on Thursday. The pair continues to receive weak support at 0.9071. This line could face more pressure if the Australian dollar resumes its downward spiral. 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, and this is also a weak line. 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 reversed directions and is pointing to movement towards short positions in Thursday trading. Currently, we are not seeing any movement from the pair, but the ratio activity could be an early sign that the Australian dollar will resume its downward journey.
AUD/USD has taken a breather, and with the US markets closed on Thursday, it could shape up to be an uneventful day for the pair.
- 1:30 Australian Building Approvals. Estimate 0.4%. Actual 0.1%.
- 2:30 Australian RBA Deputy Governor Philip Lowe Speaks.
- 23:30 Australian AIG Construction Index.
*Key releases are highlighted in bold
*All release times are GMT
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