AUD/USD – Aussie Steady as US Housing Data Dips

AUD/USD is stable, as the pair trades just below the 0.93 line in the North American session. On the release front, it’s a quiet start to the week. US New Home Sales slipped to 412 thousand, well below the estimate. There are no Australian releases on Monday.

The week started off on a disappointing note, as the US New Home Sales dropped to 412 thousand, down from 422 thousand a month earlier (the latter figure was revised from 406 thousand). This was well off the estimate of 426 thousand. There was stronger housing data last week, as Housing Starts hit an 8-month high. We’ll get another look on Thursday, with the release of Pending Home Sales.

Financial leaders and central bankers met at Jackson Hole for a conference, and the markets were all ears as Fed chair Janet Yellen delivered the keynote address on Friday. Any hopes for some dramatic news were dashed, as Yellen did not provide any clues as to the timing of a rate hike. She reiterated that the US job market still needed to improve, so employment numbers remain a crucial factor in any rate move by the Fed. There is a divergence in monetary stance between the ECB and the Fed, as the Fed is winding up QE, while the ECB may be forced to provide stimulus to the sagging Eurozone economy.

US releases wrapped up the week on a high note. Unemployment Claims improved to 298 thousand, lower than the estimate of 302 thousand. The key indicator has now beaten the estimate in six of the past seven readings. Thursday’s other key event, the Philly Fed Manufacturing Index, shot higher in July, rising to 28.0 points. The markets had expected the indicator to slip to 19.7 points. There was more good news on the housing front, as Existing Home Sales improved to 5.15 million, well above the estimate of 5.01 million. This marked the highest level we’ve since September 2013. What is particularly encouraging is that the data stems from a wide range of sectors, which points to balanced economic growth.

RBA Governor Glenn Stevens testified before parliament last week, and delivered a rather downbeat message. Stevens said that in the present economic environment, the economy needed an injection of confidence rather than lower interest rates. Stevens also warned that the risk of the Australian dollar dropping to lower levels was “underestimated”. His comments followed the RBA minutes, which were also somewhat pessimistic. Policymakers stated there was a “significant degree of uncertainty” in the economic outlook, and therefore a rate decrease is unlikely.

AUD/USD for Monday, August 25, 2014

AUD/USD August 25 at 15:15 GMT

AUD/USD 0.9298 H: 0.9324 0.9290

AUD/USD Technical

• AUD/USD lost ground early in the Asian session but then recovered. The pair edged lower in the European session and is stable in North American trade.
• 0.9229 continues to provide support.
• 0.9361 is the next resistance line. 0.9446 is next.
• Current range: 0.9229 to 0.9361

Further levels in both directions:

• Below: 0.9229, 0.9119, 0.9020 and 0.8916
• Above: 0.9361, 0.9446, 0.9617 and 0.9757

OANDA’s Open Positions Ratio

AUD/USD ratio is unchanged on Monday. This is consistent with the movement of the pair, which has been very limited. The ratio has a majority of long positions, indicative of trader bias towards the Australian dollar breaking out and moving to higher ground.

AUD/USD Fundamentals

• 13:45 US Flash Services PMI. Estimate 59.2 points. Actual 58.5 points.
• 14:00 US New Home Sales. Estimate 412K. Actual 426K.

* 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.