AUD/USD – Aussie Remains Under Pressure

The Australian dollar continues to struggle as it trades below the 0.88 line in Tuesday trading. In economic news, it’s another quiet day, with no US releases on Tuesday. In Australia, Westpac Consumer Sentiment will be released later in the day. This will be followed by CPI, a key event which could impact on the movement of AUD/USD.

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 1st.

The Australian dollar has hit tough times, and coughed up about 150 points last week. The currency will need some help from Australian key events if it is to keep pace with the surging US dollar. Last week’s Australian Employment Change was dismal, as 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. If Australian CPI does not meet expectations, the wobbly Aussie could lose more ground.

AUD/USD for Tuesday, January 21, 2014

AUD/USD January 21 at 13:05 GMT

AUD/USD 0.8784 H: 0.8834 L: 0.8776

AUD/USD Technical

• AUD/USD has posted slight losses in Friday trading. The pair dropped below the 0.88 line early in the European session.
• 0.8735 continues to provide support. This line could face pressure if the Aussie continues its downward slide. 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 has reversed positions in Tuesday trading and is pointing to gains in short positions. This is consistent with what we are seeing from the pair, as the Australian dollar has lost ground. AUD/USD is made up of a substantial majority of long positions, reflecting a trader bias towards the Australian dollar reversing directions and posting gains against the US currency.

The Australian dollar is trading slightly below the 0.88 line. Will it continue to drop? With no major releases out of the US on Tuesday, it could be a quiet North American session for AUD/USD.

AUD/USD Fundamentals

• 23:30 Australian Westpac Consumer Sentiment.

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