AUD/USD – Aussie Rally Continues on Dovish Fed Statement

The Australian dollar has posted considerable gains on Thursday, as AUD/USD trades at 0.7072 in the European session. On the release front, Australian Import Prices posted a decline of 0.3%, beating expectations. Later in the day, Australia releases PPI and Private Sector Credit. In the US, the Federal Reserve maintained interest rate levels and issued a cautious policy statement. There are two key events on the schedule, Core Durable Goods and Unemployment Claims.

There was little surprise in the markets as the Federal Reserve maintained interest rates at 0.25%. The Fed statement was dovish in tone, as policymakers noted that there are soft spots in the economy, such as consumer spending and exports. The inflation picture remains problematic, with the Fed saying that inflation levels will remain low, and may not reach the target of 2.0% until 2018. At the same time, the Fed emphasized that the US labor market remains strong. Will we see another rate hike in March? That’s a tough question to answer, as the central bank has provided any strong hints on its next move. Given the Fed’s continuing concerns about a lack of inflation, it’s hard to foresee another rate hike in March absent a strong improvement in key US indicators.

The Aussie has posted strong gains this week and pushed back above the symbolic 0.70 line. AUD/USD has posted strong gains after the Federal Reserve issued a dovish statement which left a March rate hike in doubt. Earlier in the week, the Australian dollar received a boost from positive inflation numbers out of Australia. CPI, one of the most important economic indicators, posted a gain of 0.4% in the fourth quarter, beating the forecast of 0.3%. Trimmed Mean CPI, which excludes the most volatile items which make up CPI, gained 0.6% in the fourth quarter, ahead of the estimate of 0.5%. If PPI and Private Sector Credit numbers beat expectations on Thursday, the Aussie could gain more ground against the greenback.

AUD/USD Fundamentals

Wednesday (Jan. 27)

19:30 Australian Import Prices. Estimate -0.8%. Actual -0.3%

Thursday (Jan. 28)

• 8:30 US Core Durable Goods Orders. Estimate -0.1%
• 8:30 US Unemployment Claims. Estimate 281K
• 8:30 US Durable Goods Orders. Estimate -0.6%
• 10:00 US Pending Home Sales. Estimate 1.0%
• 10:30 US Natural Gas Storage. Estimate -215B
• 19:30 Australian PPI. Estimate 0.6%
• 19:30 Australian Private Sector Credit. Estimate 0.6%

Upcoming Key Events

Friday (Jan. 29)

• 8:30 US Advance GDP. Estimate 0.8%

*Key events are in bold

*All release times are EST

AUD/USD for Thursday, January 28, 2016

AUD/USD January 28 at 6:25 EST

AUD/USD Open: 0.7009  Low: 0.7078  High: 0.7091  Close: 0.7072

AUD/USD Technical

• The pair posted slight gains in the Asian and continues to move upwards in European trade
• 0.6931 is providing support
• There is resistance at 0.7063
• Current range: 0.6931 to 0.7063

Further levels in both directions:

• Below: 0.7063, 0.6931, 0.6848 and 0.6754
• Above: 0.7100, 0.7213 and 0.7385

OANDA’s Open Positions Ratio

AUD/USD 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.