AUD/USD - Aussie Slightly Higher, Australian Construction Index Dips

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Includes: FXA, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

The Australian dollar has posted small gains on Friday, following sharp losses in the Thursday session. AUD/USD is trading at 0.7530 in the European session. In economic news, Australian AIG Construction Index continues to dip and dropped to 45.2 points in March. In the US, In the US, today’s sole economic indicator is Wholesale Sales, with the markets expecting a decline of 0.2%. The markets will be all ears as two FOMC members, Esther George and William Dudley deliver speeches later in the day.

With the Australian dollar posting gains of 12 percent since February, RBA Governor Glenn Stevens decided to weigh in on global currency developments. Steven said that a higher Australian dollar could hamper the Australian economy’s recovery. Stevens hinted that the easing measures taken by other central banks had contributed to the Australian currency’s appreciation. The Aussie has surged 12 percent in the past two months against its US counterpart, to the consternation of the RBA. Will the central bank step in and lower rates next month? It’s certainly a possibility, and one key factor is the quarterly inflation report – if inflation softened in the first quarter, the RBA could feel compelled to take action and lower interest rates.

After Janet Yellen’s cautious speech in New York last week, the Federal Reserve followed suit on Wednesday, as the March meeting minutes were dovish. The minutes indicated that the Fed is unlikely to raise rates before June at the earliest. Although some policymakers expressed approval for a rate hike in April, others expressed concern about the risks to the US economy posed by global economic conditions. There was a split amongst members as to whether the recent pickup in inflation was sustainable. Many Fed members were worried about the lack of options available to the Fed since rates remain close to zero. This could result in significant impact on the currency markets, since the dollar could strengthen if the Fed is unable to implement effective easing measures. The minutes appear to be a validation of Janet Yellen’s remarks last week, which were very dovish and dampened growing enthusiasm about a rate hike as early as April. What can we expect from the Fed in 2016? There is a strong likelihood that the Fed will raise rates twice during the year, but the timetable of any moves is unclear. At a panel discussion on Thursday, Yellen said she did not consider the December rate hike a mistake and said that the Fed was monitoring the economy very carefully.

AUD/USD Fundamentals

Thursday (April 7)

19:30 Australian AIG Construction Index. Actual 45.2

Friday (April 8)

00:15 FOMC Member Esther George Speaks

8:30 FOMC Member William Dudley Speaks

10:00 US Wholesale Inventories. Estimate -0.2%

*All release times are DST

AUD/USD for Friday, April 8, 2016

AUD/USD April 8 at 7:40 DST

Open: 0.7513 Low: 0.7508 High: 0.7569 Close: 0.7534

AUD/USD Technical

S3 S2 S1 R1 R2 R3

0.7213 0.7385 0.7472 0.7560 0.7678 0.7796

AUD/USD posted slight gains in the Asian session and has been uneventful in European trade

0.7472 is providing support

0.7560 is a weak resistance line

Current range: 0.7472 to 0.7560

Further levels in both directions:

Below: 0.7472, 0.7385 and 0.7213

Above: 0.7560, 0.7678, 0.7796 and 0.7913

OANDA’s Open Positions Ratio

The AUD/USD ratio is unchanged on Friday. Short and long positions are evenly split, indicative of a lack of trader bias as to which direction the pair will take 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.