AUD/USD - Lower Ahead Of Fed Statement

 |  Includes: FXA, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

The Australian dollar has moved lower on Wednesday, wiping out the gains we saw a day earlier. In the European session, AUD/USD is trading in the mid-0.87 range. In economic news, US manufacturing data looked dismal on Tuesday, as Core Durable Goods Orders and Durable Goods Orders both posted declines in December. CB Consumer Confidence surprised the markets by crossing above the 80-point level. Wednesday's highlight is the Federal Reserve Monetary Policy Statement, as the Fed decides whether to implement another dose of QE tapering. There are no Australian releases on Wednesday.

Will we see another taper from the US Federal Reserve? The markets are waiting for the Fed's policy statement on Wednesday, with most analysts predicting that the Fed will indeed go ahead and reduce QE for a second straight month. Such a move would be an important vote of confidence in the US economy, and could give a boost to the US dollar against its major rivals. This policy meeting will be chairman Bernard Bernanke’s last hurrah, as Janet Yellen takes over the reins of the Fed on February 1.

There was some good news out of Australia for a change, as NAB Business Confidence, a key event, improved to 6 points in December, up from 5 points a month earlier. However, CB Leading Indicators failed to keep pace, dropping to just 0.2%, down from a 0.5% gain in November. The strong Business Confidence release gave the wobbly Aussie a brief boost, but it has surrendered those gains on Wednesday.

In the US, Core Durable Goods Orders posted another decline, its sixth in seven readings. The key manufacturing release fell 1.6%, well short of the estimate of a 0.7% gain. It was the indicator's sharpest drop since August 2012. There was no relief from Durable Goods Orders, which plunged lower by 4.3%, nowhere near the estimate of 1.9%. CB Consumer Confidence looked much sharper, climbing to 80.7 points, up from 78.1 a month earlier. The estimate stood at 78.3 points.

AUD/USD for Wednesday, January 29, 2014

Forex Rate Graph 21/1/13

AUD/USD January 29 at 14:55 GMT

AUD/USD 0.8740 H: 0.8826 L: 0.8728

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.84505 0.8658 0.8735 0.8893 0.9000 0.9119
Click to enlarge
  • AUD/USD has reversed directions in Wednesday trading and has lost ground. The pair dropped below the 0.88 line early in the European session and continues to lose ground.
  • 0.8735 is under strong pressure as the Aussie continues to weaken. This is followed by support at 0.8658.
  • 0.8893 is the next resistance line. It is followed by resistance at the key level of 0.9000.
  • Current range: 0.8735 to 0.8893

Further levels in both directions:

  • Below: 0.8735, 0.8658, 0.8505, 0.8425 and 0.8363
  • Above: 0.8893, 0.9000, 0.9119 and 0.9229

OANDA's Open Positions Ratio

AUD/USD ratio has reversed directions in Wednesday trading and is pointing to gains in short positions. This is consistent with what we are seeing from the pair, as the Australian dollar has lost ground. AUD/USD ratio 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 Aussie is under pressure in Wednesday trading the US dollar. With the Federal Reserve issuing a policy statement later in the day, we could see some movement from AUD/USD during the North American session.

AUD/USD Fundamentals

  • 15:30 US Crude Oil Inventories. Estimate 2.2M.
  • 19:00 US FOMC Statement.
  • 19:00 US Federal Funds Rate. Estimate <0.25%.

*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.