The Australian dollar is steady on Wednesday, as AUD/USD trades at 0.7030 in the European session. On the release front, Australia will release two major employment reports, Employment Change and the Unemployment Rate. There are no key US events on the schedule, and the markets are keeping an eye on Unemployment Claims, which will be released on Thursday.
It’s been a disastrous start in 2016 for the Australian dollar, which plunged some 340 points against the greenback last week. The Aussie recorded daily losses every day last week, as the currency dropped to lows not seen since September 2014. AUD/USD has recovered some of these losses this week, but the Aussie remains under pressure as nervous investors have dumped minor currencies like the Australian dollar in favor of the safe-haven US dollar, due to recent events in China. The Chinese stock market has started 2016 with sharp losses, and a surprise devaluation of the Chinese yuan further weakened the Aussie. Will the Australian dollar break below the symbolic 0.70 level? The next test for the struggling Aussie comes later on Wednesday, with the release of Australian Employment Change, a key event which often has a strong impact on the direction of AUD/USD. The markets are braced for a weak reading of -11 thousand.
US job numbers continue to impress, underscoring a robust US labor market. On Tuesday, JOLTS Job Openings improved to 5.43 million, beating the estimate of 5.41 million and above the previous reading of 5.38 million. Late last week, Nonfarm Employment Change surged to 292 thousand, crushing the estimate of 203 thousand. This was the strongest reading in 10 months. The unemployment rate remained unchanged at 5.0%, within the Federal Reserve’s definition of “full employment”. One area of concern in the employment picture is that of wage growth, which has not kept up with the strong improvement in payrolls. Even if the US economy is technically at “full employment”, slack remains in the labor market, meaning that employers are not feeling under any pressure to raise wages. This was underscored by the Average Hourly Earnings in December, which posted a flat reading of 0.0%, short of the forecast of 0.2%. This key event is a leading indicator of consumer inflation, meaning that wages must increase before consumers spend more, thus leading to more inflation. The Fed has hinted that the December rate is the first of a series of incremental moves in 2016, and inflation levels will play an important role in any decision to raise rates.
Wednesday (Jan. 13)
- 10:30 US Crude Oil Inventories. Estimate 1.9M
- 13:01 US 10-year Bond Auction
- 14:00 US Beige Book
- 14:00 US Federal Budget Balance. Estimate -2.7B
- 19:30 Australian Employment Change. Estimate -11.0K
- 19:30 Australian Unemployment Rate. Estimate 5.9%
Upcoming Key Events
Thursday (Jan. 14)
- 8:30 US Unemployment Claims. Estimate 275K
*Key releases are highlighted in bold
*All release times are EST
AUD/USD for Wednesday, January 13, 2016
AUD/USD January 13 at 6:05 EST
AUD/USD Open: 0.6984 Low: 0.6981 High: 0.7049 Close: 0.7024
- AUD/USD posted gains in the Asian session but has steadied in European trade
- 0.7063 is a weak resistance line
- 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 has showed movement towards short positions. Long positions still command a majority of positions (57%), indicative of trader bias towards the pair continuing to move higher.
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