AUD/USD – Aussie Rally Continues on Optimistic RBA Statement

The Australian dollar continues to push upwards on Tuessday, as AUD/USD trades just shy of the 0.73 line at the start of the North American session. The Aussie has now racked up over 100 points this week, as the currency trades at 6-week highs against its US counterpart. In economic news, the RBA held interest rates at 2.00%, and the RBA statement had an optimistic tone about the economy, helping the Australian dollar climb for a second straight day. Over in the US, we’ll get a look at US manufacturing data, highlighted by ISM Manufacturing PMI. The markets are expecting a forecast of 50.6 points.

There were no surprises from the RBA, which held interest rates at 2.00%. The central bank reiterated that it would consider cutting rates if the economy took a turn for the worse. We’ve heard this record often before, but the RBA sounded somewhat optimistic about the Australian economy, stating that “the prospects for an improvement in economic conditions had firmed a little over recent months”. Although one could argue that this was a rather tepid thumbs-up on the part of policymakers, it was still enough of a springboard for investors to snap up Australian dollars, sending the currency to higher levels.

US manufacturing data has not impressed in recent readings, indicative of continuing weakness in the manufacturing sector. The Empire State Manufacturing Index posted a dismal reading of -10.7 points, worse than the estimate of -5.3 points. This marked a fourth straight decline by the important indicator. The Philly Fed Manufacturing Index posted a weak gain of 1.9 points. If the ISM Manufacturing PMI, a key event, falls short of expectations, the US dollar could lose ground.

With the US economy generally producing strong data, in particular employment numbers, speculation has increased that the Federal Reserve will change course and raise interest rates for the first time in ten years. Unemployment Claims were down sharply last week, and even a lukewarm Nonfarm Payroll report late in the week is unlikely to present an obstacle for the Fed. At the same time, there is a serious concern over low inflation levels, as the Fed has noted in the past that inflation is an important factor in the rate decision process. We’ll get a look at one more round of CPI and PPI reports prior to the Fed policy meeting on December 16, and these releases could cause some volatility in the markets if they are not close to the estimates. Meanwhile, the guessing game continues, and the markets will be closely following every key release and comments from Fed members in the two weeks leading up to the critical December policy meeting.

AUD/USD Fundamentals

Tuesday (Dec. 1)

• 14:45 US Final Manufacturing PMI. Estimate 52.6 points
• 15:00 US ISM Manufacturing PMI. Estimate 50.6 points
• 15:00 US Construction Spending. Estimate 0.5%
• 15:00 US ISM Manufacturing Prices. Estimate 40.0 points
• All Day – Total Vehicles Sales. Estimate 18.0M
• 16:45 US FOMC Member Charles Evans Speaks

Upcoming Key Events

Wednesday (Dec. 2)

• 13:15 ADP Nonfarm Employment Change. Estimate 191K
• 17:25 Fed Chair Janet Yellen Speaks

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD for Tuesday, December 1, 2015

AUD/USD December 1 at 13:15 GMT

AUD/USD 0.7291 H: 0.7299 L: 0.7220

AUD/USD Technical

• AUD/USD has posted gains in the Asian and European sessions.
• 0.7213 has some breathing room in support as the pair trades at higher levels.
• 0.7349 is providing resistance.
• Current range: 0.7213 to 0.7349

Further levels in both directions:

• Below: 0.7213, 0.7100 and 0.7063
• Above: 0.7349, 0.7440, 0.7526 and 0.7644

OANDA’s Open Positions Ratio

AUD/USD ratio is showing little movement, as long and short positions remain an even split. This is indicative of a lack of trader bias as to what 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.