AUD/USD – Under Pressure After Solid US Job Claims

AUD/USD is stable on Thursday, as the pair trades slightly below the 0.93 line in the North American session. In economic news, Australian CB Leading Index gained 0.4% in July, a six-month high. In the US, Unemployment Claims beat the estimate, coming in at 298 thousand. Later in the day, we’ll get a look at the Philly Fed Manufacturing Index. The markets are braced for a sharp drop in the July reading.

In a highly anticipated event, the Federal Reserve released its policy meeting minutes on Wednesday. The minutes were hawkish in tone, with the Fed saying that an interest rate hike could come sooner rather than later if employment numbers continue to improve. The Fed said that the economy continues to improve, but the QE program, which is scheduled to wind up in October, will not be accelerated.

The US economy has been moving in the right direction, but inflation numbers in the US remain at very low levels. On Tuesday, CPI and Core CPI, the primary gauges of consumer inflation, both posted paltry gains of 0.1%. These weak readings come on the heels of PPI, a manufacturing inflation index, which also came in at 0.1% last month. Weak inflation is one reason why the Federal Reserve is in no rush to raise interest rates, as low inflation points to slack in the economy. Meanwhile, US housing numbers were sharp on Tuesday. Building Permits improved to 1.05 million, beating the estimate of 1.00 million. Housing Starts jumped to 1.09 million, easily beating the estimate of 0.97 million.

Financial leaders and central bankers from around the world will gather in Jackson Hole, Wyoming for a conference which starts on Thursday. This will be Janet Yellen’s first appearance as Fed chair at the conference. There is speculation that Jackson Hole could be a currency event, which would be a marked departure from the conference’s usual focus on the US labor market and monetary policy. If this is the case, we could see a sharp reaction from the currency markets. Traders should treat Yellen’s speech on Friday as a market-moving event.

RBA Governor Glenn Stevens testified before parliament on Tuesday, and managed to talk down the Australian dollar, which dipped below the 0.93 line. Stevens said that in the present economic environment, the economy needed an injection of confidence rather than lower interest rates. Stevens also warned that the risk of the Australian dollar dropping to lower levels was “underestimated”. His comments follow the minutes from its recent policy meeting, and the tone was somewhat pessimistic. Policymakers stated there was a “significant degree of uncertainty” in the economic outlook, and therefore a rate decrease is unlikely. The RBA cut its growth and inflation forecasts in July, wage growth has slowed and unemployment has climbed.

 

AUD/USD for Thursday, August 21, 2014

AUD/USD August 21 at 13:40 GMT

AUD/USD 0.9293 H: 0.9298 L: 0.9238

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.9020 0.9119 0.9229 0.9361 0.9446 0.9617

 

  • AUD/USD lost ground in the Asian session but recovered. The pair has continued to move higher throughout the day and is close to the 0.93 line.
  • 0.9229 continues to provide support.
  • 0.9361 is the next resistance line. 0.9446 is next.
  • Current range: 0.9229 to 0.9361

Further levels in both directions:

  • Below: 0.9229, 0.9119, 0.9020 and 0.8916
  • Above: 0.9361, 0.9446, 0.9617 and 0.9757

 

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in long positions on Thursday, reversing the direction we saw a day earlier. This is consistent with the movement of the pair, as the Aussie has posted small gains. The ratio has a majority of long positions, indicative of trader bias towards the Australian dollar breaking out and moving to higher ground.

 

AUD/USD Fundamentals

  • 12:30 US Unemployment Claims. Estimate 302K. Actual 298K.
  • 13:45 US Flash Manufacturing PMI. Estimate 55.7 points. Actual 58.0 points.
  • 14:00 US Philly Fed Manufacturing Index. Estimate 19.7 points.
  • 14:00 US Existing Home Sales. Estimate 5.01M.
  • 14:00 US CB Leading Index. Estimate 0.6%.
  • 14:30 US Natural Gas Storage. Estimate 83B.
  • Day 1 – Jackson Hole Symposium.

* 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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.