By Kenny Fisher
The Australian dollar has posted slight losses on Friday, as AUD/USD trades at the 0.71 line in the European session. In economic news, there are no Australian releases on the schedule. In the US, the markets are eying key inflation reports from the US, with the release of CPI and Core CPI. Traders should be prepared for possible volatility in the currency markets following these releases.
Last week, Australian employment indicators disappointed with soft numbers. Employment Change dropped 7.9 thousand, marking a second straight decline. This weak figure surprised the markets, which had forecast a gain of 12.9 thousand. The unemployment rate also failed to impress, climbing to an even 6.0%. This figure was considerably higher than the estimate of 5.8%. Earlier in the week, the RBA released the minutes of its previous monetary policy meeting. The minutes reiterated the central bank’s view that the Australian economy has shown modest improvement, but concerns remain over the softer Chinese economy, which is Australia’s largest trading partner. The RBA continues to maintain an easing bias, primarily as a result of weak inflation levels, and has repeatedly said that it is prepared to cut interest rates from the current level of 2.00% if necessary. The markets will be keeping a close eye on Australian releases leading up to the RBA policy meeting, which will take place early next week.
The US released CPI last week, the key gauge of consumer inflation. CPI came in at 0.0%, and Core CPI improved to 0.3%, marking the strongest gain since April 2015. These readings are certainly not strong, but managed to beat their estimates, so speculation has increased that the Fed may reconsider a rate hike in March. However, such a move still seems unlikely, unless inflation picks up dramatically. Earlier in the week, the Federal Reserve sent out a cautious message in its minutes, which reiterated the central bank’s concern that turmoil in global markets could have negative repercussions for the US economy. Policymakers sent out a broad hint that a rate hike is unlikely in March, as they discussed “altering their earlier views of the appropriate path for the target range for the federal funds rate”. This could have a negative impact on the US dollar, as investors may look elsewhere to park their funds if US rates are not moving higher anytime soon. Federal Reserve chair Janet Yellen said last week that the Fed still planned to raise rates later in 2016, but FOMC member James Bullard argued that there was room to delay any rate moves, given global financial turmoil and weak US inflation. Many experts are skeptical that the Fed will make any more moves before next year, but central banks have a way of surprising the markets.
Monday (Feb. 22)
- 9:45 US Flash Manufacturing PMI. Estimate 52.3 points
- 10:30 Australian CB Leading Index
Upcoming Key Events
Tuesday (Feb. 23)
- 10:00 US CB Consumer Confidence. Estimate 97.4 points
*Key releases are highlighted in bold
*All release times are EST
AUD/USD for Monday, February 22, 2016
AUD/USD February 22 at 7:30 EST
AUD/USD Open: 0.7143 Low: 0.7138 High: 0.7197 Close: 0.7184
- AUD/USD has posted gains in the Asian and European sessions
- 0.7100 is providing support
- There is resistance at 0.7213. This is a weak line
- Current range: 0.7100 to 0.7213
Further levels in both directions:
- Below: 0.7100, 0.7012, 0.6931 and 0.6848
- Above: 0.7213, 0.7385 and 0.7440
OANDA’s Open Positions Ratio
AUD/USD ratio is showing slight movement towards short positions, consistent with the gains by AUD/USD, which have resulted in the covering of some long positions. Currently, the ratio is almost evenly split between long and short positions, which is indicative of a lack of trader bias as to which direction the pair will head next.
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.