AUD/USD – Steady as Markets Eye RBA Minutes

AUD/USD is trading quietly as we begin the new trading week. The pair is trading in the 0.9070 range early in Monday’s North American session. On Friday, US numbers were mixed. UoM Consumer Sentiment was well below the  estimate, while PPI posted a sharp gain. Australian data started off the week on the right foot, as New Motor Vehicles posted its sharpest gain of the year in May. The markets are keeping a close eye on the RBA, which will release the minutes of its last monetary policy meeting early on Tuesday. China released GDP, a key event, and there was some disappointment as GDP dipped and missed the estimate. Over in the US, Core Retail Sales and Retail Sales both fell short of their estimates. However, there was a strong manufacturing release as the Empire State Manufacturing Index posted it best performance since January. 

The markets got some good news from Australian data, as New Motor Vehicles jumped from 0.0% to 4.0% in June, its sharpest gain since October 2012. Increased sales of motor vehicles points to consumers who are more optimistic about the economy and are purchasing big-item tickets such as cars and trucks. The news was not as good out of China, which saw Q2 GDP drop to a three-month low. The key indicator slipped to 7.5% from 7.7%, and missed the forecast of 7.7%. The Aussie is often sensitive to key Chinese releases, since the Asian giant is Australia’s number one trading partner. So we could still see the Australian dollar react negatively to this figure.

The markets will be carefully monitoring the minutes of the RBA’s last policy meeting, which is a market-mover. The RBA did not lower interest rates at the last meeting, but a senior RBA policymaker stated publicly that the RBA board members had deliberated for a long time whether to reduce rates or not. Predictably, this statement moved the markets, and further details from the minutes could cause some volatility for AUD/USD.

Over in the US, retail sales data was weak. Core Retail Sales fell from 0.3% to 0.0%, while Retail Sales slid from 0.6% to 0.4%. Both key releases fell short of their estimates. There was another strong showing from the Empire State Manufacturing Index, which jumped from 7.8 points to 9.5 points, its best level since January.  

The US ended the week on a mixed note. UoM Consumer Sentiment disappointed as it missed expectations. The key indicator improved in June to 83.9 points from 82.7, but this fell well short of the estimate of 85.3 points. However, the markets appeared to focus on the fact that the indicator posted a respectable gain and remains at high levels, so the dollar was not hurt. PPI, an important inflation index, looked strong as it jumped from 0.5% to 0.8%. The estimate stood at 0.5%, and this was the best showing since October 2012.

The US dollar lost ground to the Australian currency last week, following the release of the minutes from the Fed’s last policy meeting, as well as dovish remarks from Fed chair Bernard Bernanke. The minutes indicated that Federal Reserve policymakers remain deeply divided over when to scale down the current round of QE, whereby the Fed purchases $85 billion in assets each month. About half of the Fed policymakers favor scaling down QE before the end of 2013, while others feel that the employment market is still too fragile for the Federal Reserve to take any action. The dollar continued to lose ground as Federal Reserve chair Bernanke gave a speech in which he said that the Fed would maintain a loose monetary policy for the foreseeable future, due to low levels of inflation and a high US unemployment rate. The Aussie hopped onto the bandwagon and posted sharp gains against the greenback, climbing close to the 0.93 level. However, AUD/USD could not hold on to these gains, and gave them up prior to the end of the trading week. 

 

AUD/USD for Monday, July 15, 2013

Forex Rate Graph 21/1/13
 

AUD/USD July 15 at 13:20 GMT

AUD/USD 0.9071 H: 0.9122 L: 0.9036

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.8747 0.8916 0.9000 0.9072 0.9135 0.9221

 

AUD/USD is steady in Monday trading. The pair broke above the 0.91 line in the Asian session, but was unable to consolidate these gains, and dipped back into 0.90 territory in the European session. AUD/USD is testing resistance at 0.9071. This line could see further action during the day. This is followed by resistance at 0.9135. On the downside, the 0.90 line has some breathing room. This is followed by support at 0.8916, which was last tested in September 2010.

  • Current range: 0.9000 to 0.9072

Further levels in both directions:

  • Below: 0.9000, 0.8916, 0.8747 and 0.8578
  • Above: 0.9072, 0.9135, 0.9221, 0.9328, 0.9405 and 0.9541

 

OANDA’s Open Positions Ratio

AUD/USD ratio is starting the week quietly, showing no change in Monday trading. This is consistent with what we are seeing from the pair, which is also subdued. The ratio continues to have a wide majority of long positions, indicating a strong bias by traders to the Australian dollar improving.

AUD/USD dipped below the critical 0.90 barrier on Friday, but the pair has bounced back as it trades  in the high-0.9000 range. What’s next for the Aussie. We could see the pair show some volatility after the release of the RBA minutes early on Tuesday.

 

AUD/USD Fundamentals

  • 1:30 Australian New Motor Vehicle Sales. Actual 4.0%.
  • 12:30 US Core Retail Sales. Estimate 0.7%. Actual 0.4%.
  • 12:30 US Retail Sales. Estimate 0.5%. Actual 0.0%.
  • 12:30 Empire State Manufacturing Index. Estimate 5.2 points. Actual 9.5 points.
  • 14:00 US Business Inventories. Estimate 0.2%.

 

*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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.