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By Kenny Fisher

The Australian dollar has posted slight losses on Wednesday, as the currency gave up most of the gains made a day earlier. Late in the European session, AUD/USD is trading in the mid-0.94 range. In economic news, Australian Trade Balance was awful, as the indicator posted its largest deficit since December 2012. In the US, ADP Nonfarm Payrolls shot up and had its best showing since December 2011. Later in the day, Fed chair Janet Yellen addresses the IMF in Washington.

Australian Trade Balance is closely linked to currency demand, as foreigners need to purchase Australian dollars to pay for Australian exports. The indicator posted a deficit of $1.91 billion, surprising the markets, which had expected a small deficit of $0.16 billion. Meanwhile, there were no surprises from the RBA, which held the course, maintaining the benchmark interest rate at 2.50%. The central bank has pegged the rate at this level since last August. The central bank is trying to revive the economy with the low-level rates, and has not taken kindly to the high-flying Aussie, which is trading at high levels against its US counterpart.

In the US, ADP Nonfarm Payrolls exceeded all expectations, adding 281 thousand jobs in June. This easily beat the estimate of 207 thousand and bodes well for the official Nonfarm Payrolls which will be released on Thursday (a day earlier than usual due to the Fourth of July holiday in the US). If Nonfarm Payrolls can beat the estimate, we could see the US dollar make up some more ground against the Aussie.

Last week's US GDP release for Q1 was a disaster, as the economy contracted by almost 3%. However, the markets remained calm, and the US dollar escaped without much damage against most of its major rivals. More recent releases have been better, notably consumer confidence, housing data and Wednesday's excellent ADP Nonfarm Payrolls.

AUD/USD for Wednesday, July 2, 2014

AUD/USD July 2 at 13:40 GMT

AUD/USD 0.9436 H: 0.9495 L: 0.9430

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9119 0.9229 0.9361 0.9446 0.9617 0.9757

  • AUD/USD edged lower in the Asian session and lost more ground late in European trading. The US dollar remains under pressure in North American trading.
  • 0.9361 is providing strong support.
  • 0.9446 has reverted to a resistance role as the Aussie trades at lower levels. 0.9617 is stronger.

Further levels in both directions:

  • Below: 0.9361, 0.9229, 0.9119 and 0.9000
  • Above: 0.9446, 0.9617, 0.9757 and 0.9847

OANDA's Open Positions Ratio

AUD/USD ratio is pointing to gains in short positions on Wednesday, reversing the direction seen a day earlier. This is consistent with the movement of the pair, as the Australian dollar has lost ground. The ratio has a majority of short positions, indicative of trader bias towards the US dollar continuing to gain ground against the Aussie.

AUD/USD Fundamentals

  • 1:30 Australian Trade Balance. Estimate -0.16B. Actual -1.91B.
  • 11:05 RBA Assistant Governor Guy Debelle Speaks.
  • 12:15 US ADP Nonfarm Employment Change. Estimate 207K. Actual 218K.
  • 14:00 US Factory Orders. Estimate -0.4%.
  • 14:30 US Crude Oil Inventories. Estimate -2.2M.
  • 15:00 US Fed Chair Janet Yellen 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.

Source: AUD/USD: Modest Losses On Weak Trade Balance