AUD/USD – Limited Moves Ahead of US Employment Report

The Australian dollar is steady on Thursday, as AUD/USD trades slightly above the 0.69 line in the European session. On the release front, Australian MI Inflation Expectations. posted a strong gain of 3.6%. In the US, all eyes are on Unemployment Claims, a key employment indicator. The markets are expecting a slight improvement, with an estimate of 279 thousand.

The Aussie continues to have a miserable start to 2016. AUD/USD is flirting with 11-year lows, and has plunged over 400 points in the month of January. There was no relief from consumer indicators, as Westpac Consumer Sentiment posted a second straight decline, slipping 3.5% in January. The Aussie has been hit hard by the continuing slowdown in China, as the Asian giant is Australia’s number one trading partner. The latest bad news was Chinese GDP for the fourth quarter, which pointed to weaker economic activity. The key indicator dipped to 6.8%, shy of the forecast of 6.9%. Chinese GDP for 2015 came in at 6.9%, the weakest gain in 25 years. Geopolitical hot spots such as the Persian Gulf and the monumental oil collapse 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’s descent could continue.

Federal Reserve policymakers must decide whether another rate hike would be appropriate in early 2016. However, one pressing trouble spot is the US inflation picture. This was underscored on Wednesday, as key inflation numbers missed their estimates. CPI dropped 0.1%, short of the estimate of 0.0%. Core CPI also softened, posting a gain of 0.1%. This was short of the forecast of 0.2%. Will these weak numbers dampen Fed enthusiasm for a rate hike? 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 inflation levels improve.

AUD/USD Fundamentals

Wednesday (Jan. 20)

  • 19:00 Australian MI Inflation Expectations. Actual 3.6%

Thursday (Jan. 21)

  • 8:30 US Philly Fed Manufacturing Index. Estimate -5.8 points
  • 8:30 US Unemployment Claims. Estimate 279K
  • 10:30 US Natural Gas Storage. Estimate -180B
  • 11:00 US Crude Oil Inventories. Estimate 3.3M

*Key events are in bold

*All release times are EST

AUD/USD for Thursday, January 21, 2016

AUD/USD January 21 at 6:40 EST

AUD/USD Open: 0.6940  Low: 0.6875  High: 0.6958  Close: 0.6915

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.6625 0.6754 0.6848 0.6931 0.7063 0.7100
  • The pair was choppy in the Asian session and has posted gains in the European session.
  • 0.6931 was tested earlier and is a weak resistance line.
  • 0.6848 is providing support
  • 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 short positions, which still command a majority of positions (55%). This is indicative of trader bias towards the pair 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.