AUD/USD – Aussie Choppy Ahead of Australian CPI

The Australian dollar is showing limited movement on Tuesday, as AUD/USD trades at 0.6960 in the European session. On the release front, Australia will release the quarterly CPI report. In the US, today’s key event is CB Consumer Confidence, with the markets forecasting a strong reading of 96.6 points.

The Aussie remains under strong pressure, and currently finds itself below the symbolic 0.70 line. Minor currencies like the Australian dollar have been hit hard in early 2016 by the slowdown in China, with Chinese stock markets down sharply and Chinese GDP continuing to edge lower. As well, the oil collapse continues, with the commodity mired at 12-year lows. These events have resulted in nervous investors fleeing from risky currencies like the Australian dollar and snapping up safe-haven assets such as the yen and US dollar.

The Federal Reserve will be in the market spotlight on Wednesday, as the Fed concludes a two-day meeting and issues a policy statement. It’s unlikely that the Fed will raise interest rates, which currently stand at 0.25%. Economic conditions have changed significantly since the Fed raise rates in mid-December, with global stock markets and oil prices sharply lower since the historic rate hike in December. According to Morgan Stanley Morgan chief economist Ellen Zentner, financial conditions have tightened by the equivalent of four rate hikes, so the Fed may hold off from further tightening for the near future. We can expect the Fed to perform a balancing act in the upcoming statement, acknowledging weaker economic conditions while emphasizing that the economy continues to grow. The collapse of oil prices has contributed to the weak inflation picture, with current inflation levels well below the Fed target of 2.0%. Traders should be prepared for possible volatility following the upcoming policy statement.

AUD/USD Fundamentals

Tuesday (Jan. 26)

  • 9:00 US HPI. Estimate 0.4%
  • 9:00 S&P/CS Composite-20 HPI. Estimate 5.7%
  • 9:45 US Flash Services PMI. Estimate 53.9 points
  • 10:00 US Richmond Manufacturing Index. Estimate 3 points
  • 10:00 US CB Consumer Confidence. Estimate 96.6 points
  • 18:30 Australian MI Leading Index
  • 19:30 Australian CPI. Estimate 0.3%
  • 19:30 Australian Trimmed CPI. Estimate 0.5%

Upcoming Key Events

Wednesday (Jan. 27)

  • 14:00 FOMC Statement
  • 14:00 Federal Funds Rate. Estimate <0.50%

*Key events are in bold

*All release times are EST

AUD/USD for Tuesday, January 26, 2016

AUD/USD January 26 at 6:40 EST

AUD/USD Open: 0.6938  Low: 0.6918  High: 0.6968  Close: 0.6980

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.6754 0.6848 0.6931 0.7063 0.7100 0.7213
  • The pair has been marked by choppy movement in the Asian and European sessions
  • 0.6931 was tested earlier as a support line and remains under pressure
  • There is resistance at 0.7063
  • 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 is showing little movement, reflective of a lack of movement from the pair. The ratio remains close to an even 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.

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.