AUD/USD – Aussie Rally Continues Despite Weak Consumer Confidence Release

The Australian dollar continues to move upwards against the US currency, and is testing the 0.92 line in Wednesday’s European session. The Aussie shrugged off a weak Westpac Consumer Sentiment release, as well as a disappointing Chinese Trade Balance. MI Inflation Expectations will also be released late Wednesday. The US holds a 10-year bond auction, and the Federal Reserve will publish the minutes of the most recent FOMC policy meeting, which could shake up the markets. As well, Federal Reserve head Bernard Bernanke will speak at a conference in Cambridge Mass.

AUD/USD continues to move higher, and the pair has climbed about 150 points since the start of the week. Westpac Consumer Sentiment, a key release, posted a small decline of -0.5%, pointing to consumer concern over economic conditions. This follows a healthy gain of 4.7% last month. In China, the trade surplus jumped from $20.4 billion to $27.1 billion, but fell short of the estimate of $27.8 billion. The Australian dollar is generally sensitive to Chinese major releases, since the Asian giant is China’s number one trading partner.

The markets will get a good look at the Australian labor market on Thursday, with the release of Employment Change and the Unemployment Rate. Earlier this week, the markets were treated to a disappointing domestic employment release. ANZ Job Advertisements, which provides a snapshot of the labor market, continues to flounder, posting a decline of -1.6%. This is the fifth decline out of six releases this year, and points to a weak Australian economy that is having trouble creating jobs. If Thursday’s employment numbers fail to impress the markets, we could see an end to the Aussie rally.

With the US posting strong employment numbers and the recovery looking stronger, there is increased speculation that the Federal Reserve will taper QE later this year. Federal Reserve chair Bernard Bernanke has stated that the Fed would act by the end of the year if the economy continues to improve, resulting in a massive sell-off of US bonds, which raised yields and bolstered the US dollar. The markets are eagerly waiting for the release of the FOMC’s last recent policy meeting, which will be released on Wednesday. Traders should be prepared for some volatility in the currency markets after this major release. Bernanke will be addressing an economic conference later on Wednesday, and analysts will be monitoring the speech for any clues as to the Fed’s future monetary policy.

AUD/USD for Wednesday, July 10, 2013

AUD/USD July 10 at 12:30 GMT

AUD/USD 0.9197 H: 0.9234 L: 0.9127

AUD/USD Technical

AUD/USD has pushed higher, as the pair tests the 0.92 in the European session. The pair continues to face resistance at 0.9221. This line was breached earlier ,and could fall if the Australian dollar continues to move higher. There is stronger resistance at 0.9328. On the downside, there is support at 0.9135. This is followed by 0.9071, which has strengthened as the pair trades at higher levels.

Current range: 0.9135 to 0.9221

Further levels in both directions:

• Below: 0.9135, 0.9071, 0.9000, 0.8916 and 0.8747
• Above: 0.9221, 0.9328, 0.9405, 0.9541 and 0.9651

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged in Wednesday trading. The ratio has not kept pace with the pair, as we are seeing the Aussie post further gains against the US dollar. The ratio continues to be dominated by long positions, indicating a strong bias towards AUD/USD continuing to recover and move upwards.

The Australian dollar took a hit from the broadly stronger US currency late last week, and fell close to the significant 0.90 level. However, the Aussie has turned the tables this week and is testing the 0.92 line. Will the upward trend continue? We could see some volatility later on Wednesday as the Federal Reserve releases the minutes of its last policy meeting. The markets won’t have much of a break, as Australia releases key employment data early Thursday, and this could affect the movement of AUD/USD.

AUD/USD Fundamentals

• 3:40 RBA Assistant Governor Guy Debelle Speaks.
• 14:00 US Wholesale Inventories. Estimate 0.3%.
• 14:30 US Crude Inventories. Estimate -2.9M.
• 17:00 US 10-year Bond Auction.
• 18:00 US FOMC Meeting Minutes.
• 20:10 US Federal Reserve Chairman Bernard Bernanke Speaks.
• 21:00 Australian MI Inflation Expectations.
• 21:30 Australian Employment Change. Estimate 0.3K.
• 21:30 Australian Unemployment Rate. Estimate 5.6%.

*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.