AUD/USD – Aussie Slips as Australian Consumer Sentiment Disappoints

The Australian dollar has posted losses on Wednesday, as AUD/USD trades at 0.6850 in the European session. On the release front, Australian Westpac Consumer Sentiment disappointed with a sharp drop of 3.5%. Later in the day, the US releases consumer inflation reports, as well as Building Permits. On Thursday, the US will release two key events, Unemployment Claims and the Philly Fed Manufacturing Index.

The Aussie continues to have a miserable start to 2016, as AUD/USD slipped 140 points late last week. AUD/USD is flirting with 11-year lows, and has plunged over 400 points in the month of January. The Aussie lost ground on Wednesday, as Westpac Consumer Sentiment posted a second straight decline, slipping 3.5% in January. Recent events in China have weakened the Aussie, with the Chinese stock market meltdown and the devaluation of the Chinese yuan spooking the markets. Chinese GDP for the fourth quarter showed another drop, as the key indicator dipped to 6.8%, shy of the forecast of 6.9%. GDP for 2015 came in at 6.9%, the weakest gain in 25 years. Geopolitical hot spots such as the Persian Gulf and the oil crash have also contributed to significant movement away from minor currencies like the Aussie towards the safe-haven US dollar. With investors demonstrating little appetite for risk, the Australian dollar could slide even further.

Weak US inflation indicators remain a concern for Federal Reserve policymakers, who must decide whether another rate hike would be appropriate in early 2016. The Federal Reserve raised interest rates in December for the first time in nine years, and hinted that this move was the first of a series in 2016. There is speculation that the Fed could make a move in March, contingent on the US economy continuing to show strong numbers. At the same time, minutes from the Federal Reserve Policy meeting in December indicated that some policymakers are concerned that the inflation picture may not improve anytime soon, and it would be premature to raise rates again before the inflation levels improve. CPI, the primary gauge of consumer inflation, will be released later on Wednesday, so this release could be an important factor with regard to monetary policy.

AUD/USD Fundamentals

Tuesday (Jan. 19)

  • 18:30 Australian Westpac Consumer Sentiment. Estimate -3.5%

Wednesday (Jan. 20)

  • 8:30 US Building Permits. Estimate 1.20M
  • 8:30 US CPI. Estimate 0.0%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Housing Starts. Estimate 1.19M
  • 10:30 US Crude Oil Inventories. Estimate 3.3M
  • 19:00 Australian MI Inflation Expectations
  • 19:00 Australian HIA New Home Sales

Thursday (Jan. 21)

  • 8:30 US Philly Fed Manufacturing Index. Estimate -3.1 points
  • 8:30 US Unemployment Claims. Estimate 281K

*Key events are in bold

*All release times are EST

AUD/USD for Wednesday, January 20, 2016

AUD/USD January 20 at 6:40 EST

AUD/USD Open: 0.6920  Low: 0.6827  High: 0.6911  Close: 0.6858

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.6625 0.6754 0.6848 0.6931 0.7063 0.7100
  • The pair sustained losses in the Asian session and is choppy in the European session.
  • 0.6931 is providing resistance
  • 0.6848 has switched to a support role as the pair has lost ground
  • Current range: 0.6848 to 0.6931

Further levels in both directions:

  • Below: 0.6848, 0.6754 and 0.6625
  • Above: 0.6931, 0.7063, 0.7100 and 0.7213

OANDA’s Open Positions Ratio

AUD/USD ratio has shown movement towards long positions, which command a majority of positions (58%). This is indicative of trader bias towards the pair reversing directions and moving 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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.