Seeking Alpha
Currencies, macro, fixed income
Profile| Send Message|
( followers)  

By Kenny Fisher

The Australian dollar has lost ground in Thursday trading, erasing the gains we saw a day earlier. In the North American session, AUD/USD is trading just below the 0.88 line. In economic news, Australian MI Inflation Expectations rose to 2.3%. Over in the US, Unemployment Claims posted another strong release of 326 thousand. Existing Home Sales will be posted later in the day.

The wobbly Australian dollar didn't get any help from a weak Chinese Manufacturing PMI, which led to investors dumping the risky Aussie in favor of the safe-haven US dollar. The key Chinese PMI dropped below the 50-point level for the first time since June, coming in at 49.6 points, missing the estimate of 50.6 points. A reading below 50 indicates contraction.

Australian inflation indicators looked strong on Wednesday. CPI, a key event, posted a gain of 0.8% in December. This was a drop from the 1.2% gain a month earlier, but well above the market estimate of 0.5%. Trimmed Mean CPI, which excludes the most volatile items purchased by consumers, came in at 0.9%, up from 0.7% in November. The indicator beat the estimate of 0.6%. These numbers were better than expected and helped the Aussie move higher in Wednesday trading.

The World Economic Forum is underway in Davos, Switzerland. The prestigious brings together senior political officials, head of foreign banks and business people from dozens of countries. Traders should note that thee currency markets can be affected by statements issued at the forum, particularly those made by central bankers or other senior officials.

Weak inflation concerns are not restricted to Europe or Japan, as the US has also been plagued by persistently low inflation, an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1% in December. Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. Last week, 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. Analysts will be watching closely whether incoming Fed chair Janet Yellen shares these sentiments. Yellen takes over the helm of the Federal Reserve on February 1, replacing Bernard Bernanke.

AUD/USD for Thursday, January 23, 2014

Forex Rate Graph 21/1/13

AUD/USD January 23 at 14:40 GMT

AUD/USD 0.8790 H: 0.8847 L: 0.8764

AUD/USD Technical

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

  • AUD/USD has posted losses in Thursday trading. The pair touched a low of 0.8764 in the European session.
  • 0.8735 continues to provide support. This line has weakened as the Australian dollar trades at lower levels. This is followed by support at 0.8658, which has remained intact since July 2010.
  • 0.8893 is the next resistance line. 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 ratio has reversed directions in Thursday 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 has posted losses. AUD/USD is made up of a substantial majority of long positions, reflecting a trader bias towards the Australian dollar moving higher against the US currency.

The Australian dollar has dropped below the 0.88 line. The pair is steady in the North American session.

AUD/USD Fundamentals

  • oo:30 Australian MI Inflation Expectations. Actual 2.3%
  • Day 2 – WEF Annual Meetings.
  • 13:30 US Unemployment Claims. Estimate 331K. Actual 326K.
  • 14:00 US Flash Manufacturing PMI. Estimate 55.2.
  • 14:00 US HPI. Exp. 0.4%. Actual 0.1%.
  • 15:00 US Existing Home Sales. Estimate 4.94M. Actual 4.87M.
  • 15:00 US CB Leading Index. Estimate 0.2%. Actual 0.1%.
  • 15:30 US Natural Gas Storage. Estimate -112B.
  • 16:00 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 - Aussie Dips Below 88 After Weak Chinese Mfg. Data