AUD/USD – Lower as US Non-Farm Payrolls Shine

AUD/USD is losing ground in Friday trading. The pair has fallen below the 0.91 line early in the North American session. US Non-Farm Employment Change looked  very sharp, hitting a four-month high. The Unemployment Rate did not follow suit and edged higher. Average Hourly Earnings looked solid, posting a gain and beating the estimate. In Australia, the AIG Construction Index, released on Thursday, showed some upward movement, posting its highest level since March. There are no Australian releases on Friday. 

The markets have been waiting for US Non-Farm Employment Change all week, and the key indicator did not disappoint. The indicator rose from 175 thousand to 195 thousand, blowing past the estimate of 163 thousand. This marked the third consecutive reading above the market estimate, and comes on the heels of solid US Unemployment Claims numbers. The Unemployment Rate was unchanged at 7.6%. The markets had expected a slight drop to 7.5%, so this release was a disappointment. We could see the US dollar begin next week with some gains, buoyed by the strong Non-Farm Payrolls.

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 a rate cut from the RBA 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.

AUD/USD for Friday, July 5, 2013

AUD/USD July 5 at 12:50 GMT

AUD/USD 0.9119 H: 0.9179 L: 0.9099

AUD/USD Technical

AUD/USD continues to show little movement on Friday, as the pair stays close to the 0.91 line. The pair continues to face weak resistance at 0.9135. This line could face more pressure if the Australian dollar can reverse its downward spiral and move higher. There is stronger resistance at 0.9221. On the downside, there is support at 0.9071, which is also a weak line. This is followed by the psychologically significant 0.90 line, which has held firm since September 2010.

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 is continuing the trend we saw on Thursday, as it points to movement towards short positions in the Friday session. This is in line with what we are seeing from the pair, as the Aussie has lost some ground on Friday. The ratio continues to be dominated by long positions, indicating a strong bias to AUD/USD recovering and moving upwards.

AUD/USD has resumed its losng ways and has dropped below the 0.91 line, as a solid US employment release has bolstered the US dollar. This week is looking like another bad one for the hapless Aussie, and we could see the currency move closer to the important 0.90 line next week.

AUD/USD Fundamentals

• 12:30 US Non-Farm Employment Change. Estimate 163K. Actual 195K.
• 12:30 US Unemployment Rate. Estimate 7.5%. Actual 7.6%.
• 12:30 US Average Hourly Earnings. Estimate 0.2%. Actual 0.4%.

*Key releases are highlighted in bold

*All release times are GMT

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