Following sharp gains by the Australian dollar earlier in the week after the Fed QE announcement, the US dollar has partially recovered. In Friday trading, AUD/USD is trading in the mid-0.94 range. In economic news, the US posted excellent numbers on Thursday, led by a solid Unemployment Claims release. There are no major releases out of the US on Friday, but we could see some movement from AUD/USD as several Federal Reserve policymakers speak, including FOMC Member James Bullard, who will address an event in New York City. There are no Australian releases on Friday.
AUD/USD was up sharply on Wednesday, following the surprise announcement on Wednesday by the Federal Reserve not to taper its bond-buying program. Most analysts had expected the Fed to announce a scaling down of the present bond-buying program of $85 billion/month by as much as $15 billion/month. However, the Fed decided to stay the QE course for now, stating that the US economic data was not strong enough to warrant QE tapering at this time. The Fed also downgraded its forecast for the economy, estimating GDP growth for 2013 at 2.0-2.3%, down from 2.3-2.6% in an earlier forecast. It also lowered its outlook for 2014 from 2.9%-3.1%, down from 3.0-3.5%. The Aussie took full advantage of the Fed announcement, gaining about 150 points against its US counterpart.
Overshadowed by the FOMC Statement were some excellent US releases on Thursday. Unemployment Claims came in at 309 thousand, well below the estimate of 331 thousand. Existing Home Sales rose to 5.48 million, crushing the estimate of 5.27 million, and posting its best level in over three years. The Philly Fed Manufacturing Index rocketed from 9.3 to 22.3 points, its best showing since May 2011. Perhaps if we’d seen this kinds of numbers a week or two ago, the Fed might have introduced QE tapering. The strong numbers helped the US dollar recover some of its mid-week losses against the Aussie.
Earlier in the week, the RBA released the minutes of its most recent policy meeting, and left room for future interest rate cuts. At the meeting, the RBA kept the benchmark interest rate steady at 2.50%. The minutes stated that “members agreed that the bank should again neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them”. In plain English – no rate moves for now, but that could change. The RBA has indicated that it would prefer a cheaper Australian dollar, which could concern investors and weigh on the currency. If the Australian dollar continues to trade close to the 0.95 level, there is a stronger likelihood that the RBA will intervene and reduce interest rates.
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AUD/USD September 20 at 11:50 GMT
AUD/USD 0.9434 H: 0.9458 L: 0.9422
- AUD/USD is showing little movement in Friday trading, as the pair trades in the mid-0.94 range.
- The pair faces resistance at 0.9508. This is followed by a strong line at 0.9613.
- On the downside, the pair is receiving weak support at the round number of 0.9400. This line could face strong pressure if the US gains ground. This is followed by stronger support at 0.9328.
- Current range: 0.9400 to 0.9508
Further levels in both directions:
- Below: 0.9400, 0.9328, 0.9221, 0.9135 and 0.9089
- Above: 0.9508, 0.9613, 0.9700 and 0.9821
OANDA’s Open Positions Ratio
AUD/USD ratio is unchanged in Friday trading. This is reflective of what we are currently seeing from the pair, which is not showing much movement. Long positions retain a sizeable majority, indicative of strong trader sentiment towards the Aussie moving higher.
AUD/USD has settled down after strong gains in mid-week. With no economic releases out of Australia or the US on Friday, it could be an uneventful North American session for the pair.
AUD/USD Fundamentals
- 16:30 US FOMC Member Esther George Speaks.
- 16:40 US FOMC Member Daniel Tarullo Speaks.
- 16:55 US FOMC Member James Bullard Speaks.