AUD/USD - Aussie Gains, Markets Eye FOMC Statement, Australian Job Reports

by: Dean Popplewell

By Kenny Fisher

The Australian dollar has posted moderate gains on Wednesday, erasing the losses recorded in the Tuesday session. The pair is trading at the 0.74 line in the North American session. On the release front, Australian Consumer Sentiment posted a decline of 1.0%. Later in the day, Australia releases Employment Change, with the markets expecting a strong reading of 14.9 thousand. There was positive news out of the US, as PPI came in at 0.4%, beating the estimate of 0.3%. As well, the Empire State Manufacturing Index was unexpectedly strong, with a reading of 6.0 points. Today’s highlight is the FOMC rate statement, with the markets expecting the Federal Reserve to maintain the current benchmark rate of 0.25%.

Australian consumer confidence disappointed in the June report. The indicator declined 1.0%, compared to an excellent gain of 8.5% in the previous reading. Business confidence also disappointed, dipping to a 3-month low in May, according to the NAB Business Confidence survey. The indicator dipped to 3 points, compared to 5 points in the previous month. NAB chief economist Alan Oster noted that business confidence had not improved as much as expected since the RBA rate cut in May, adding that the RBA was unlikely to lower rates before August. Australians go to the polls in three week’s time, so traders should be prepared for volatility from the Australian as we head closer to the election. With Australia’s economy certain to be a hot issue during the campaign, a business think tank is warning that the country’s AAA credit rating could be at risk if the next government fails to reign in budget deficits. The Committee for Economic Development of Australia has called for a bipartisan approach to repair the economy and restore a budget surplus. A lower credit rating would make Australia less attractive for business and investment and would likely send the Australian dollar sharply lower.

All eyes are on the Federal Reserve’s policy meeting, which will conclude with a rate statement later on Wednesday. The markets have written off a rate hike in June, while a July move remains unlikely, according to the CME Group. The chances of a June hike are just 1.9% compared to a 26.3% in May. The chances of a July hike is 17.9%, compared to 43.2% in May. The sharp drop in market sentiment for a rate hike can be attributed to the dismal US Nonfarm Payrolls report as well as some backpedaling by Fed over the past few weeks. Back in April, Fed chair Janet Yellen had renewed hopes of rate hike in the summer, when she said that she expected a rate hike in “the coming months”. Since then, Yellen has sounded more cautious, and in a recent speech she was careful to avoid a time frame regarding a rate hike. To be fair, the Fed has made a strong effort to communicate clearly with the markets, and has stated that the timing of a rate hike would be data-dependent. With the US economy posting some mixed numbers and inflation levels remaining at low levels, it should not come as a surprise that the Fed may stay on the sidelines until September or even later. Although it’s extremely unlikely that the Fed will make a move in June, the markets will be carefully monitoring the rate statement, looking for some clues regarding a July rate hike.

AUD/USD Fundamentals

Tuesday (June 14)

20:30 Australian Westpac Consumer Sentiment. Actual -1.0%

Wednesday (June 15)

  • 8:30 US PPI. Estimate 0.3%. Actual 0.4%
  • 8:30 US Core PPI. Estimate 0.1%. Actual 0.3%
  • 8:30 US Empire State Manufacturing Index. Estimate -3.4. Actual 6.0
  • 9:15 US Capacity Utilization Rate. Estimate 75.2%. Actual 74.9%
  • 9:15 US Industrial Production. Estimate -0.2%. Actual -0.4%
  • 10:30 US Crude Oil Inventories
  • 14:00 US FOMC Economic Projections
  • 14:00 FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <0.50%
  • 14:30 US FOMC Press Conference
  • 16:00 US TIC Long-Term Purchases
  • 21:00 Australian MI Inflation Expectations
  • 21:30 Australian Employment Change. Estimate 14.9K
  • 21:30 Australian Unemployment Rate. Actual 5.7%
  • 21:30 Australian New Motor Vehicle Sales
  • 21:30 RBA Bulletin
  • 20:30 RBA Deputy Governor Philip Lowe Speaks

Upcoming Key Events

Thursday (June 16)

  • 8:30 US CPI. Estimate 0.3%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Philly Fed Manufacturing Index. Estimate 1.1
  • 8:30 US Unemployment Claims. Estimate 267K

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Wednesday, June 15, 2016

AUD/USD June 15 at 10:00 EDT

Open: 0.7352 Low: 0.7333 High: 0.7408 Close: 0.7400

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.7160 0.7251 0.7339 0.7472 0.7612 0.7739
Click to enlarge
  • AUD/USD has posted small gains in the Asian and European sessions. AUD/USD is steady in the North American trade
  • 0.7339 continues to provide weak support
  • 0.7472 is providing resistance
  • Current range: 0.7339 to 0.7472

Further levels in both directions:

  • Below: 0.7339, 0.7251 and 0.7160
  • Above: 0.7472, 0.7612 and 0.7739

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged on Wednesday. Long positions command a majority (56%), indicative of trader bias towards AUD/USD continuing to move to higher ground.

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.