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By Kenny Fisher

The US dollar is enjoying broad strength in Wednesday trading, and the Australian currency finds itself on the wrong end of the stick. AUDUSD continues to drop and has lost about 150 points since Monday. The pair is trading just above the 0.89 line early in the North American session. In economic news, US PPI rebounded in December with a gain of 0.4%, just shy of the estimate. The Empire State Manufacturing Index looked very sharp, jumping to a twenty-month high of 12.5 points. In Australia, the sole release of the day, New Motor Vehicles Homes showed little change, posting a gain of 0.7%.

US inflation numbers were solid on Wednesday. PPI, a key release, rebounded from a decline in November and posted a gain of 0.4%, just short of the estimate of 0.5%. Core PPI improved to 0.3%, up from 0.1% a month earlier. The estimate stood at 0.1%. The US dollar responded positively to the figures and is broadly higher against the major currencies. The greenback continues to post gains against the Aussie, which is struggling to stay above the 0.89 line.

Last week's disappointing Non-Farm Payrolls report may have created some concern in the markets, but is unlikely to change the Federal Reserve's path of tapering QE, which it started just this month. In December, outgoing Fed chair Bernard Bernanke strong hinted that the Fed planned to wind up QE by the end of 2014, reducing the asset-purchase program by increments of $10 billion at each Fed policy meeting. The Fed will hold its next policy meeting on January 28, and the question is will the Fed reduce QE by another $10 billion, down to $65 billion each month. Most analysts feel that one bad employment report will not affect the taper schedule and the Fed will continue to scale down QE at the next policy meeting.

AUD/USD for Wednesday, January 15, 2014

Forex Rate Graph 21/1/13

AUD/USD January 15 at 15:10 GMT

AUD/USD 0.8907 H: 0.8971 L: 0.8889

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.8658 0.8735 0.8893 0.9000 0.9119 0.9229

  • AUD/USD continues to post losses in Wednesday trading. The pair briefly dropped below the 0.89 line in the European session.
  • 0.8893 has weakened as a support line and could break if the Aussie swoon continues. This is followed by support at 0.8735, which has remained intact since July 2010.
  • 0.9000 is providing resistance. This key line has some breathing room as the pair trades at lower levels. It is followed by resistance at 0.9119.
  • Current range: 0.8893 to 0.9000

Further levels in both directions:

  • Below: 0.8893, 0.8735, 0.8658 and 0.8505
  • Above: 0.9000, 0.9119, 0.9229 and 0.9305 and 0.9448

OANDA's Open Positions Ratio

AUD/USD has reversed directions in Wednesday trading and is pointing to gains in long positions. This is not consistent with what we are seeing from the pair, as the Australian dollar continues to lose ground. AUD/USD is made up of a substantial majority of long positions, reflecting a trader bias towards the Australian dollar reversing its downward slide and moving higher against the US currency.

The Australian dollar has lost ground in Wednesday trading. The pair has steadied early in the North American session as it tries to stay above the 0.89 level.

AUD/USD Fundamentals

  • 00:30 Australian New Motor Vehicle Sales. Actual 1.7%.
  • 13:30 US PPI. Estimate 0.5%. Actual 0.4%.
  • 13:30 US Core PPI. Estimate 0.1%. Actual 0.3%.
  • 13:30 US Empire State Manufacturing Index. Estimate 3.2 points. Actual 12.5 points.
  • 15:30 US Crude Oil Inventories. Estimate -0.7M.

*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.

Source: AUD/USD - Solid U.S. Inflation Pushes Greenback Higher