The Australian dollar is showing limited movement on Friday, as AUD/USD trades at the 0.72 line early in the North American session. It’s likely to be a quiet day for the pair, as there are no Australian or US releases on Friday.
Australian Private Capital Expenditure, a key event, was a huge disappointment on Thursday. The indicator came in at -9.2% in the third quarter, surprising the markets, which had expected a reading of -2.8%. The report also indicated that the falloff in business spending is expected to continue, as companies expect to invest some 20.9% less in the current fiscal year compared to the previous fiscal year. This does not bode well for the Australian economy, which has been hampered by a sharp drop in mining investment and softer demand from China for Australian raw materials. Earlier in the week, Construction Work Done also looked dismal, posting a sharp decline of 3.6% in the third quarter. This was much worse than the forecast of a 1.8% decline.
The US released a host of data ahead of the Thanksgiving holiday and key releases painted a mixed picture. Unemployment Claims plunged to 260 thousand, well off the estimate of 273 thousand. There was more good news from Core Durable Goods, which rebounded with a strong gain of 0.5%, matching the forecast. UoM Consumer Sentiment improved to 91.3 points, but the markets were overly optimistic, as the estimate stood at 93.2 points. This consumer confidence indicator comes on the heels of CB Consumer Confidence, which dropped to 90.4 points, nowhere close to the estimate of 99.3 points. These weak consumer confidence readings could raise concerns, as soft consumer confidence numbers could translate into weaker consumer spending, which is a key driver of economic growth.
The guessing game continues – will the Federal Reserve pull the rate trigger in December? Last week’s Fed minutes did not confirm a rate hike, but most analysts feel that the long-awaited move will indeed occur next month. The Fed hinted at a rate hike in its October policy statement, and the markets have been abuzz ever since. Last week, New York Fed President William Dudley said there is a “strong case” for a rate hike in December as long as economic data remains strong. With the US economy looking solid and employment and consumer indicators pointing upwards, the markets appear prepared for some monetary tightening with small, incremental hikes. One fly in the ointment is that of weak inflation levels, as the Fed has repeatedly stated that inflation is a key consideration in any decision to raise rates. With the critical Fed meeting only a few weeks away, every key indicator and comment from Fed members will be under close scrutiny from the markets.
Friday (Nov. 27)
- There are no Australian or US releases on Friday
AUD/USD for Friday, November 27, 2015
AUD/USD November 27 at 13:30 GMT
AUD/USD 0.7199 H: 0.7240 L: 0.7195
- AUD/USD was uneventful in the Asian session and posted small losses in the European session.
- 0.7213 has switched to a resistance role. It is a weak line.
- The round number of 0.71 is a strong support level.
- Current range: 0.7100 to 0.7213
Further levels in both directions:
- Below: 0.7100, 0.7063 and 0.7000
- Above: 0.7213, 0.7440, 0.7526 and 0.7644
OANDA’s Open Positions Ratio
AUD/USD ratio is showing little movement, consistent with the lack of movement from the pair. Long and short positions are an even split. This is indicative of a lack of trader bias as to what direction the pair will take next.