The new trading week is starting very quietly, as AUD/USD trades in the low-0.92 range in the European session on Monday. The G20 meeting wrapped up in Moscow on the weekend, and the G20 promised that any changes in monetary policy would be done in a careful way. Taking a look at economic releases, it’s a quiet start to the week, with just one release on Monday – US Existing Home Sales. There are no Australian releases on Monday.
The G20, which includes Australia, wrapped up a meeting of finance ministers and central bankers in Moscow on the weekend. The delegates pledged that future changes to monetary policy would be “carefully calibrated and clearly communicated”. This is likely a hint to the recent market turmoil in response to statements from the Federal Reserve regarding possible QE tapering. The Fed has not always sounded consistent, and predictably, the resulting uncertainty has rattled the markets. Leaders of the G20 will meet in St. Petersburg in September, and a final draft statement from the Moscow meeting noted that a plan to increase jobs and growth and rebalance debt will be ready for the September meeting.
US Federal Reserve chair Bernard Bernanke was at center stage on Wednesday and Thursday, as he testified before Congress. However, Bernanke did not add anything we haven’t heard before, and his testimony was not a market-mover by any means. Bernanke reiterated that the Fed’s monetary policy would remain accommodative, and added that the Fed’s bond-buying program was “not on a preset course”. This vague statement leaves the Fed plenty of wiggle room to scale down QE should it choose to do so. Bernanke reiterated that any decision to scale down QE would depend on improving economic conditions. He noted that present US unemployment levels (7.6%) were “well above” normal levels, and was careful to stay away from presenting any specific time deadlines for scaling down QE. So, the message from the Fed to the markets seems to be that QE tapering is not on the table before the economy improves and unemployment falls.
Almost lost in the focus on Bernanke’s testimony on Capitol Hill were a couple of strong US releases on Thursday. Unemployment Claims fell sharply from 360 thousand to 334 thousand, well below the estimate of 344 thousand. On the manufacturing front, the Philly Fed Manufacturing Index surged, rising from 12.5 to 19.8 points. This was its best showing since March 2011, and easily surpassed the estimate of 8.5 points. If this week’s US key releases can continue the upward move this week, the US dollar could post gains against its major rivals.
AUD/USD for Monday, July 22, 2013
AUD/USD July 22 at 12:30 GMT
AUD/USD 0.9225 H: 0.9234 L: 0.9186
AUD/USD is almost unchanged as we start off the week. The pair is testing support at 0.9221, and we could see this line fall during the day. This is followed by a strong support level at 0.9135. On the upside, 0.9328 is providing strong resistance. This line has remained intact since late June. This is followed by resistance at 0.9405.
- Current range: 0.9221 to 0.9328
Further levels in both directions:
- Below: 0.9221, 0.9135, 0.9072, 0.9000, 0.8916 and 0.8747
- Above: 0.9328, 0.9405, 0.9541 and 0.9657
OANDA’s Open Positions Ratio
AUD/USD ratio is unchanged in Monday trading. This is reflected in what we are seeing from the pair, which is showing very little movement. The ratio continues to have a substantial majority of long positions, pointing to trader bias in favor of the Australian dollar moving upwards.
The Aussie did not show much reaction to Bernanke last week, and continues to trade above the 0.92 line. We could see AUD/USD continue to drift quietly, unless US Existing Home Sales, a key release, surprises the markets with an unexpected reading.
14:00 US Existing Home Sales. Estimate 5.27M
*Key releases are highlighted in bold
*All release times are GMT