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By Kenny Fisher

The Australian dollar's woes continue on Thursday, as AUD/USD has dropped by a cent. Early in the North American session, the pair is struggling to remain above the 0.88 line. The Aussie has lost about 250 points since Monday. In economic news, Australian Employment Change slumped badly, posting a nine-month low. In the US, Core CPI and Unemployment Claims met expectations, with the Philly Fed Manufacturing Index still to follow. As well, Fed chair Bernard Bernanke will deliver a speech in Washington.

Australian Employment Claims has posted gains since August, but the positive trend came to a crashing halt as the December release was a disaster. 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. Despite the dismal reading, the Unemployment Rate remained unchanged at 5.8%, matching the forecast. Predictably, the struggling Aussie reacted poorly to the news, and continues its sharp drop against the US currency.

Weak inflation levels in the US remain a concern, as this is an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1%. On Tuesday, the Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. On Wednesday, 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.

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 Thursday, January 16, 2014

Forex Rate Graph 21/1/13

AUD/USD January 16 at 14:45 GMT

AUD/USD 0.8805 H: 0.8906 L: 0.8777

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.8505 0.8658 0.8735 0.8893 0.9000 0.9119

  • AUD/USD continues to post losses in Thursday trading. The pair dropped sharply during the Asian session and touched a low of 0.8777 early in the European session.
  • 0.8735 is the first support line. This is followed by support at 0.8658, which has remained intact since July 2010.
  • 0.8893 has switched to a resistance role as the Aussie continues to lose ground. 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 directions in Thursday trading and is pointing to gains in short positions. This is 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 US dollar continues to rally against the retreating Aussie. The pair has steadied early in the North American session as it struggles to remain above the 0.88 level.

AUD/USD Fundamentals

  • 00:30 Australian Employment Change. Estimate 10.3K. Actual -22.6K.
  • 00:30 Australian Unemployment Rate. Estimate 5.8%. Actual 5.8%.
  • 13:30 US Core CPI. Estimate 0.1%. Actual 0.1%.
  • 13:30 US CPI. Estimate 0.3%. Actual 0.3%.
  • 13:30 US Unemployment Claims. Estimate 327K. Actual 326K.
  • 13:30 US Treasury Secretary Jack Lew Speaks.
  • 14:00 US TIC Long-Term Purchases. Estimate 42.3B. Actual -29.3B.
  • 15:00 US Philly Fed Manufacturing Index. Estimate 8.8 points.
  • 15:00 NAHB Housing Market Index. Estimate 58 points.
  • 15:30 US Natural Gas Storage. Exp. -296B.
  • 16:10 US Fed Chair Bernard Bernanke Speaks.

*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.