AUD/USD – Aussie Reverses Direction, Climbs Above 88

After sustaining sharp losses last week, the Aussie is pointing upwards on Monday, as AUD/USD is trading at the 0.88 line early in the North American session. Last week, the Australian dollar lost about 150 points to the surging US dollar. On Friday, US construction and employment data met expectations, but consumer confidence dipped. Monday’s trade will be light, as US markets are closed for the Martin Luther King holiday. In Australia, MI Inflation Gauge jumped 0.7%, a much sharper gain than expected. We’ll get a better indication of inflation levels in Australia with the release of CPI on Wednesday.

Last week ended on a busy note in the US, which saw the release of three key events. Building Permits showed little change, coming in at 0.99 million, shy of the estimate of 1.01 million. JOLTS Job Openings rose to 4.00 million, increasing from 3.93 million a month earlier. This beat the estimate of 3.97 million, and was welcome news from the employment front after the recent dismal Non-Farm Payrolls release. UoM Consumer Sentiment dropped to 80.4 points, down from 83.5 in the previous release. This was well below the estimate of 83.4, but a reading over the 80 line is certainly respectable.

Weak inflation levels remain a major concern in the US, as persistently low inflation is an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1% in December. Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. Last week, 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. Analysts will be listening closely as to whether incoming Fed chair Janet Yellen shares these sentiments. Yellen takes over the helm of the Federal Reserve on February 1.

Australian Employment Change had posted gains since August, but the positive trend came to a crashing halt last week, 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 currency trades at low levels against the US dollar.

AUD/USD for Monday, January 20, 2014

AUD/USD January 17 at 14:55 GMT

AUD/USD 0.8804 H: 0.8819 L: 0.8757

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 but has since crossed the 0.88 line.
• 0.8735 continues to provide support. This is followed by support at 0.8658, which has remained intact since July 2010.
• 0.8893 is the next resistance line. 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 is pointing to gains in long positions in Monday trading. This is consistent with what we are seeing from the pair, as the Australian dollar has started the week with gains. AUD/USD is made up of a substantial majority of long positions, reflecting a trader bias towards the Australian dollar continuing to move higher against the US currency.

The weak Aussie has moved back above the 0.88 line. With US markets closed for a holiday on Monday, we could be in for a lackluster showing from the pair in the North American session.

AUD/USD Fundamentals

• There are no Australian or US releases on Monday.

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.