AUD/USD – Struggling Aussie Drops Below 88 Line

The Australian dollar continues to lose ground on Friday, as AUD/USD is trading just below the 0.88 level in the European session. The Aussie is having a miserable week, as it’s coughed up over 250 points to the surging US dollar. In economic news, it’s a busy day in the US, with three key events on the schedule – Building Permits, Preliminary UoM Consumer Sentiment and JOLTS Job Openings. There are no releases out of Australia on Friday.

US Unemployment Claims looked sharp, dropping slightly to 327 thousand, very close to the estimate of 326 thousand. This was welcome news after last week’s shocking Non-Farm Payrolls. With the Fed finally starting its taper of QE, every employment release will be under the market microscope. Meanwhile, the Philly Fed Manufacturing Index continues to move higher. The indicator jumped to 9.4 points, up from 7.0 points a month earlier. This strong reading beat the estimate of 8.8 points.

Australian Employment Change had posted gains since August, but the positive trend came to a crashing halt as the December release was a disaster. The key indicator posted a decline of 22.6 thousand, a sharp reversal from last month’s gain of 21.0 thousand. The markets had expected a gain of 10.3 thousand. Despite the dismal reading, the Unemployment Rate remained unchanged at 5.8%, matching the forecast. Predictably, the struggling Aussie reacted poorly to the news, as the US dollar continues an impressive rally.

Weak inflation levels in the US remain a concern, as this is an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1%. On Tuesday, the Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. On Wednesday, Chicago Fed President Charles Evans said that the low rate of U.S. inflation is “both puzzling and worrisome,” and enough reason to maintain low interest rates, even if the employment picture continues to brighten.

AUD/USD for Friday, January 17, 2014

AUD/USD January 17 at 14:55 GMT

AUD/USD 0.8798 H: 0.8828 L: 0.8784

AUD/USD Technical

• AUD/USD has posted slight losses in Friday trading. The pair touched a low of 0.8784 early in the European session.
• 0.8735 is the next support line. This is followed by support at 0.8658, which has remained intact since July 2010.
• 0.8893 is providing resistance. It is followed by resistance at the round number of 0.9000.
• Current range: 0.8735 to 0.8893

Further levels in both directions:

• Below: 0.8735, 0.8658, 0.8505 and 0.8425
• Above: 0.8893, 0.9000, 0.9119, 0.9229 and 0.9305

OANDA’s Open Positions Ratio

AUD/USD continues to point to gains in short positions in Friday trading. This is consistent with what we are seeing from the pair, as the Australian dollar continues to lose ground. AUD/USD is made up of a substantial majority of long positions, reflecting a trader bias towards the Australian dollar reversing its downward slide and moving higher against the US currency.

The US dollar continues to rally against the retreating Aussie which has fallen below the 0.88 line. We could see some volatility in the North American session, as the US releases three key events later in the day.

AUD/USD Fundamentals

• 13:30 US Building Permits. Exp. 1.01M.
• 13:30 US Housing Starts. Exp. 0.99M.
• 14:15 US Capacity Utilization Rate. Exp. 69.2%.
• 14:15 US Industrial Production. Exp. 0.4%.
• 14:55 US Preliminary UoM Consumer Sentiment. Exp. 83.4 points.
• 14:55 US Preliminary UoM Inflation Expectations.
• 15:00 US JOLTS Job Openings. Exp. 3.97M. 

*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.