AUD/USD – Aussie Rally Continues, Punches Past 70 Line

The Australian dollar is steady on Friday, as AUD/USD trades at 0.7030 in the European session. On the release front, there are no Australian events. In the US, today’s highlight is Existing Home Sales, with the markets forecasting a strong improvement in the December report.

The Aussie has rebounded of late, recording four straight daily gains. AUD/USD has gained 120 points in that span and is back above the psychologically important 70 level. Still, the Australian currency is down some 250 points in the month of January, as minor currencies like the Australian dollar have been hit hard in early 2016 by the slowdown in China, leading to investors fleeing from risk and snapping up safe-haven currencies such as the yen and US dollar.

US inflation indicators remain weak, as inflation remains a soft spot in a generally solid US economy. 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%. Meanwhile, US jobless claims jumped to their highest level in 11 months, as the reading of 293 thousand was much worse than the estimate of 279 thousand. 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. If inflation indicators don’t point higher, we may not see a rate hike before mid-2016.

AUD/USD Fundamentals

• 10:00 US Existing Home Sales. Estimate 5.21M
• 10:00 US CB Leading Index. Estimate -0.1%

*Key events are in bold

*All release times are EST

AUD/USD for Friday, January 22, 2016

AUD/USD January 22 at 7:20 EST

AUD/USD Open: 0.7016  Low: 0.6986  High: 0.7035  Close: 0.7031

AUD/USD Technical

• The pair was choppy in the Asian session and has posted gains in the European session.
• 0.6931 has switched to a support role as the pair continues to move higher
• 0.7063 is a weak resistance line and could break during the day
• Current range: 0.6931 to 0.7063

Further levels in both directions:

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

OANDA’s Open Positions Ratio

AUD/USD ratio has reversed directions and is showing movement towards long positions. The ratio is evenly split between long and short positions, indicative of a lack of trader bias as to which direction the pair will take 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.