AUD/USD – Aussie Rebounds, Punches Past 70 Level

The Australian dollar has posted considerable gains on Monday, as AUD/USD trades at the 0.70 level in the European session. On the release front, it’s a quiet start to the week, with two minor releases on the schedule. Australian ANZ Job Advertisements disappointed with a decline of 0.1%, marking a 5-month low. The lone US release on the calendar is the Labor Markets Condition Index.

The first week of January was a disaster for the Australian dollar, which plunged some 340 points against its US counterpart. The Aussie recorded daily losses every day last week, dropping to lows not seen since late September. The Aussie has been steamrolled early in 2016 as nervous investors have dumped minor currencies like the Australian dollar in favor of the safe-haven US dollar. The plunge was precipitated by disappointing Chinese manufacturing data last week, underscoring weak demand from the world’s number two economy. This is bad news indeed for the Australian economy, as China is Australia’s largest trading partner. Australian Building Approvals, a key release, posted a sharp decline in November, which further weakened the Aussie. Market jitters intensified as tensions rose between Iran and Saudi Arabia and a nuclear device test by North Korea. Adding fuel to the fire, China has devalued the yuan by over 0.5%, triggering another bout of risk-aversion by investors.

In the US, Nonfarm Payrolls surged to 292 thousand, crushing the estimate of 203 thousand. This was the strongest reading in 10 months, and underscores a strong US employment market. The unemployment rate remained unchanged at 5.0%. The Fed will probably not make another move at its policy meeting at the end of January, so soon after the historic rate hike in December. However, many experts are expecting that the Fed will raise interest rates in March. Such a move would likely make the US dollar assets more attractive to investors and boost the greenback against its rivals. If the US economy continues to heat up, the Fed is expected to continue to tighten monetary policy over the course of 2016.

Last week, the Federal Reserve released the minutes of its historic December policy meeting, at which it raised rates by 0.25 percent. The minutes were noteworthy in highlighting differences among policymakers as to whether US inflation levels will improve. Indeed, some FOMC members said that their vote in favor of a rate hike was a close call because of concerns that low inflation levels will continue in 2016. What’s next? The Fed has hinted that the December rate hike was the first of a series of incremental moves in 2016, but inflation levels will play an important role in the timing and size of future rate hikes.

AUD/USD Fundamentals

Monday (Jan. 11)

• 19:30 Australian ANZ Job Advertisements
• 10:00 US Labor Market Conditions Index

*Key releases are highlighted in bold

*All release times are EST

AUD/USD for Monday, January 11, 2016

AUD/USD January 11 at 12:00 GMT

AUD/USD Open: 0.6937  Low: 0.6934  High: 0.7012  Close: 0.6998

AUD/USD Technical

• AUD/USD has posted gains in the Asian and European sessions
• There is resistance at 0.7063
• 0.6931 is providing support
• Current range: 0.6931 to 0.7063

Further levels in both directions:

• Below: 0.6931, 0.6848 and 0.6754
• Above: 0.7063, 0.7100, 0.7213 and 0.7349

OANDA’s Open Positions Ratio

AUD/USD ratio is unchanged on Monday, as long positions have a majority of 60%. A majority of long positions is indicative of trader bias towards the pair continuing to move higher.

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.