AUD/USD – Aussie Steady after Strong Gains

After suffering sharp losses in mid-week, the Australian dollar has bounced back up and made up most of those losses. AUD/USD gained about a cent on Thursday, and the pair was trading in the mid-0.92 level in Friday’s European session. On Thursday, US key employment and manufacturing data disappointed, as both fell short of expectations. There was better news out of the US on Friday, as Revised UoM Consumer Sentiment sparkled, hitting a six-year high.

The Aussie took advantage of weak US releases on Thursday. Unemployment Claims was a disappointment, rising from 334 thousand to 343 thousand. The estimate stood at 339 thousand. Core Durable Goods Orders, another key release, slipped badly, dropping from 0.7% to a flat 0.0%. The markets had expected another respectable gain, with an estimate of 0.5%. There was some good news from Durable Goods Orders, a second tier release. The manufacturing indicator climbed from 3.6% to 4.2%, blowing past the estimate of 1.1%. The US economy may be pointed in the right direction, but the employment and core durable goods releases underscore that the economy has plenty of room to improve.

This week’s US housing releases has analysts scratching their heads, as the releases pointed in opposite directions. Earlier in the week, Existing Home Sales dropped from 5.18 million to 5.08 million, way off the forecast of 5.27 million. However, New Home Sales soared on Wednesday, jumping from 476 thousand to 496 thousand, well above the estimate of 482 thousand. This was the key housing indicator’s best performance in five years. With mixed housing releases this week, the markets will have to wait for the August releases to get a better handle on the direction of the US housing industry.

It was a very quiet week for Australian releases, with just a couple of inflation indicators on the calendar. Australian CPI posted a second straight gain of 0.4%, just shy of the forecast of 0.5%. Another key release was Chinese Flash Manufacturing PMI, which posted a lower reading for the third consecutive month. The indicator has not been above the 50 level since April, pointing to ongoing contraction in the Chinese manufacturing sector. The index dropped from 48.3 to 47.7 points, well below the estimate of 48.6 points. The Aussie is sensitive to key Chinese releases, as China is Australia’s number one trading partner. With the Chinese economy showing signs of slowing down, the Australian dollar could find itself losing ground.

 

AUD/USD for Friday, July 26, 2013

Forex Rate Graph 21/1/13
 

AUD/USD July 26 at 14:50 GMT

AUD/USD 0.9246 H: 0.9296 L: 0.9234

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9072 0.9135 0.9221 0.9328 0.9405 0.9541

 

AUD/USD showed some upward movement in the Asian session, touching a high of 0.9296. However, the pair could not consolidate these gains, and has dropped to the mid-0.92 range. The pair is receiving support at 0.9221. This is a weak line, and could be tested if the US dollar shows some improvement. This is followed by a stronger support at 0.9135. On the upside, the pair faces resistance at 0.9328. This is followed by 0.9405, which has remained intact since mid-June.

  • 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 has shifted directions from what we’ve seen for the past couple of days, pointing to movement towards short positions on Friday. This is not reflected in what we are seeing from the pair, as the Aussie has posted very modest gains on Friday. 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 took at tumble on Wednesday, and has spent the rest of the week trying to recover from those losses. We could see the pair continue to trade in the mid-0.92 range as the trading week draws to a close.

 

AUD/USD Fundamentals

  • 13:55 US Revised UoM Consumer Sentiment. Estimate 84.0 points. Actual 85.1points.
  • 13:55 US Revised UoM Inflation Expectations.

 

*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.