AUD/USD – Aussie Pushes Above 72, US GDP Beats Estimate

The Australian dollar is steady on Tuesday, as the pair trades at 0.720 in the North American session. There are no Australian releases on the schedule. In the US, Final GDP posted a solid gain of 2.0%. With only one Australian release this week, US numbers will play a key role in what direction the pair takes this week. The Aussie lost ground in the aftermath of the Fed rate hike, but has rebounded since then, gaining 100 points against its US counterpart.

The US economy continues to improve, as GDP expanded by 2.0%, above the forecast of 1.9%. The main catalyst for the solid reading was consumer spending, as confidence about the economy remains high, as the US consumer has shown greater willingness to open the purse strings. Falling gas prices have helped, as consumers have more disposable income available. There was more good news from the manufacturing sector, which has been one area of weakness in the economy, as the Richmond Manufacturing Index jumped to a 5-month high, climbing to 6 points. The estimate stood at -1 point. However, Existing Home Sales dropped sharply, falling to 4.76 million, its worst showing since April 2014.

After months of indecision, the US Federal Reserve took the plunge last week and raised interest rates by 0.25 percent last week, the first upward move since June 2006. The Fed dropped a broad hint in its October policy meeting about a rate hike before the end of 2015, and predictably, investors and traders were busy trying to guess whether the Fed would indeed press the rate trigger. To the credit of Fed chief Janet Yellen and her colleagues, the Fed put into place a carefully-crafted strategy, sending a steady of stream of signals that it was intending to tighten monetary policy, if economic conditions remained positive. This gave the markets ample time to price in a rate hike, and currency market volatility was not excessive after the US rate hike, the first in almost 10 years. Although a hike of 0.25 percent is expected to have limited economic impact, the psychological aspect of the rate move cannot be overemphasized, as the Fed has given the US economy a critical vote of confidence. As well, this move is expected to be the first in a series of incremental rate hikes over the course of 2016.

AUD/USD Fundamentals

Tuesday (Dec. 22)

• 13:30 US Final GDP. Estimate 1.9%. Actual 2.0%
• 13:30 US Final GDP Price Index. Estimate 1.3%. Actual 1.3%
• 14:00 US HPI. Estimate 0.4%. Actual 0.5%
• 15:00 US Existing Home Sales. Estimate 5.32M. Actual 4.76M
• 15:00 US Richmond Manufacturing Index. Estimate -1 point. Actual 6 points

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD for Tuesday, December 22, 2015

AUD/USD December 22 at 17:10 GMT

AUD/USD 0.7228 H: 0.7249 L: 0.7189

AUD/USD Technical

• 0.7213 remains busy and has switched a support role. It is a weak line
• 0.7349 is a strong resistance line
• Current range: 0.7213 to 0.7349

Further levels in both directions:

• Below: 0.7213, 0.7100, 0.7063 and 0.6931
• Above: 0.7349, 0.7440 and 0.7526

OANDA’s Open Positions Ratio

AUD/USD ratio remains close to a split between long and short positions, indicative of a lack of trader bias as to which direction the pair will head 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.