AUD/USD – Aussie Losses Continue Ahead of Key US Releases

The Australian dollar is lower in Wednesday trading, as the currency continues to lose ground to the US dollar. In the European session, the pair was trading in the mid-0.93 range. In economic news, US CB Consumer Confidence was well short of the estimate for the August release. Later today, the US releases two key events – Core Durable Goods Orders and New Home Sales. The markets are expecting both releases to improve, which could put further pressure on the Aussie.

The markets have settled down after the US Federal Reserve stunned the markets in deciding not to taper QE at its policy meeting last week. Most analysts had expected the Fed to announce a scaling down of the present bond-buying program of $85 billion/mth by $10-15 billion. However, the Fed was of the opinion that US economic data, particularly employment numbers, did not justify scaling down QE at this time. Federal Reserve Bank of St. Louis President James Bullard shed some light on the dramatic move (or lack of) by the Federal Reserve. Bullard said the vote was close, but weaker US numbers led to a decision not to taper. He added that the Fed may go ahead with “small” reductions to QE at its next policy meeting in October.

In the US, the first key release of the week was a disappointment. CB Consumer Confidence dropped from 81.5 to 79.7 points in August, shy of the estimate of 79.9 points. It was the first time the indicator has dropped below the 80-point level since May. There was more bad news in the manufacturing sector, as the Richmond Manufacturing Index plunged from 14 points down to zero in August. This surprised the markets, which had expected a reading of 17 points. The markets will be looking for a turnaround from additional manufacturing data on Wednesday, with the release of Core Durable Goods Orders and Durable Goods Orders.

On Wednesday, the RBA issued its biannual financial stability review. There was nothing dramatic in the report, as the RBA noted that Australian banks are in solid shape. The RBA reiterated a call to the country’s banks to maintain loan standards in the face of record-low interest rates, which have led to an increase in credit demand. Earlier in the week Chinese Flash Manufacturing PMI showed improvement. The key index continues to point to expansion, improving from 50.1 points in July to 51.2 points in August. This beat the estimate of 50.9 points. Key Chinese releases, such as PMIs, can have a major impact on the Australian dollar, since China is Australia’s number one trading partner.

AUD/USD for Wednesday, September 25, 2013

AUD/USD 0.9358 H: 0.9394 L: 0.9338

AUD/USD Technical

• AUD/USD continues to lose ground in Wednesday trading. The pair touched a high of 0.9394 in the Asian session, but was not able to hold onto these gains.
• The pair is facing resistance at the round number of 0.9400. This is followed by stronger resistance at 0.9508.
• On the downside, the pair is receiving support at 0.9328. This weak line could be tested during the day. Next, there is a stronger support level at 0.9221.
• Current range: 0.9328 to 0.9400

Further levels in both directions:

• Below: 0.9328, 0.9221, 0.9135 and 0.9089
• Above: 0.9400, 0.9508, 0.9613, 0.9700 and 0.9821

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to movement towards short positions in Wednesday trading. This is reflective of what we are currently seeing from the pair, as the Australian dollar continues to weaken. Long positions retain a strong majority, indicative of strong trader sentiment towards the Aussie moving higher against the US dollar.

After excellent gains this month, the AUD/USD rally has hit a wall, with the currency surrendering about 150 points in the past week. With the US releasing key housing and manufacturing data later in the day, we could see some activity from the pair.

AUD/USD Fundamentals

• 12:30 US Core Durable Goods Orders. Estimate 1.1%.
• 12:30 US Durable Goods Orders. Estimate 0.0%.
• 14:00 US New Home Sales. Estimate 422K.
• 14:30 US Crude Oil Inventories. Estimate -1.0M.

*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.