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AUD/USD Capped below 90.00 Level

H.S. Borji
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AUD/USD Capped below 90.00 Level

The Australian dollar rebounded against its US counterpart in Thursday’s North American session, but the gains were limited as the AUDUSD pair continued to trade below the psychological 90.00 level.

The AUDUSD fell to an intraday low of 0.8928, the pair’s lowest since March 4. The AUDUSD would subsequently consolidate at 0.8980, advancing 0.3 percent. The daily chart shows initial support likely found at 0.8909. On the upside, resistance is ascending at 0.9149.

The Aussie fell to a fresh six-month low on Wednesday after the Federal Reserve tapered bond purchases by another $10 billion, citing sustained improvements in the US economy. The September meetings were the seventh consecutive occasion Fed policymakers tapered bond purchases by $10 billion. The US central bank is widely expected to make one final stimulus cut of $15 billion at the October Federal Open Market Committee meetings.

The Fed did however offer reassurance that interest rates would remain low for a “considerable time” after the end of the quantitative easing program. The target for the overnight rate has been left at 0.25 percent since the end of 2008.

The Reserve Bank of Australia on Thursday issued its quarterly Bulletin, a compilation of articles pertaining to the country’s economic and financial situation. One of the articles, entitled “Unemployment and Spare Capacity in the Labour Market,” suggested spare capacity in the workforce had increased over the past few years, but that it was “well below” the levels that prevailed for much of the 1990s.

The Australian labour market improved in August, as job creation rebounded and the unemployment rate eased from the previous month’s 12-year high.

Australian employers added a whopping 121,000 jobs in August, the biggest monthly increase since record keeping began in 1978, according to the Australian Bureau of Statistics. That followed a decline of 4,100 the previous month. The vast majority of the jobs (106,700) were in part-time work, official data showed.

The unemployment rate fell to 6.1 percent from 6.4 percent. The participation rate, which measures the percentage of workers employed or actively searching for work, increased 0.4 percent to 65.2 percent, a 16-month high.

Australia had no major economic data releases Scheduled for Thursday.

In US data, housing activity eased in August, as building permits and groundbreaking tumbled.

According to the Commerce Department, building permits declined 5.6 percent in August to a seasonally adjusted annual rate of 998,000, while housing starts declined 14.4 percent to 956,000.

Weaker than forecast construction data kept the US dollar subdued on Thursday. The US dollar index, which tracks the performance of the greenback against a basket of currencies excluding the Aussie, declined 0.06 percent to 84.29.

The Australian dollar is likely to face more selling pressure in the short term, as economic uncertainty and RBA sentiment weigh on the currency. The RBA believes the Australian dollar is over-valued, which is undesirable for the country’s export market and overall recovery.

An internal RBA document released on Monday reaffirmed the central bank’s concern about the over-valued nature of the Australian dollar. According to the RBA, the value of the local currency in March was “too high” to achieve desirable economic outcomes. The Aussie was trading around 90 US cents at the time.

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