AUD/USD – Aussie Steady Ahead of Aussie Job Data, Fed Minutes

The Australian dollar is showing limited movement on Wednesday, as AUD/USD trades at 0.7130 in the European session. In economic news, it’s a busy day in the US, with the release of two major indicators – Building Permits and PPI. As well, the Federal Reserve will release the minutes from its January policy meeting. Australia will release two key employment indicators – Employment Change and the Unemployment Rate.

The Aussie continues to have an uneventful week, and remained steady following the release of the minutes of the RBA’s most recent monetary policy meeting. The minutes didn’t contain anything unexpected, and reiterated the central bank’s view that the Australian economy has shown modest improvement, but concerns remain over the strength of the Chinese economy, which has softened in 2016. The RBA continues to monitor the inflation picture and has repeatedly said that it is prepared to cut rates from the current level of 2.00% if necessary. We’ll get a look at Australian job numbers later on Tuesday. The markets are expecting a strong recovery from Employment Change, with an estimate of 12.9 thousand. A strong reading from this key indicator could push the Aussie higher.

The Federal Reserve will again take center stage on Wednesday, with the release of the minutes of the January policy meeting. After that meeting, Janet Yellen & Co. issued a cautious policy statement, saying that the Fed was “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation”. The decision to hold interest rates at 0.25% was unanimous, and the Fed acknowledged that the US economy was slowing down. Gone was the optimism which characterized the December statement, when the Fed raised rates and hinted at further rate hikes in 2016. Given the current economic situation, many experts expect no more than two rate hikes this year, perhaps in June and December. At the same time, any improvement in key US numbers will heat up speculation about a possible March hike.

There was an interesting development last week when Janet Yellen appeared before Congress and refused to rule out negative interest rates. The Fed has rejected making such a move in the past, and this is unlikely to change. Still, Negative Interest Rate Policies (NIRP) has become a relevant tool for central banks. The Bank of Japan shocked the markets in January when it adopted negative rates, and the ECB has had this policy in place for some time on deposits, and has hinted that it could adopt this scheme to its benchmark rate, which currently stands at 0.05%. Such a scheme is supposed to combat deflation and boost economic growth by pressuring banks to increase lending.

AUD/USD Fundamentals

Wednesday (Feb. 17)

  • 8:30 US Building Permits. Estimate 1.21M
  • 8:30 US PPI. Estimate -0.2%
  • 8:30 US Core CPI. Estimate 0.1%
  • 8:30 US Housing Starts. Estimate 1.16M
  • 9:15 US Capacity Utilization Rate. Estimate 76.7%
  • 9:15 US Industrial Production. Estimate 0.3%
  • 14:00 FOMC Meeting Minutes
  • 18:00 FOMC James Bullard Speaks
  • 19:30 Australian Employment Change. Estimate 12.9K
  • 19:30 Australian Unemployment Rate. Estimate 5.8%

Upcoming Key Events

Thursday (Feb. 18)

  • 8:30 US Philly Fed Manufacturing Index. Estimate -2.9 points
  • 8:30 US Unemployment Claims. Estimate 275K

*Key releases are highlighted in bold

*All release times are EST

AUD/USD for Wednesday, February 17, 2016

AUD/USD February 17 at 8:10 EST

AUD/USD  Open: 0.7116 Low: 0.7083  High: 0.7139 Close: 0.7132

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.6931 0.7012 0.7100 0.7213 0.7385 0.7440
  • The pair posted slight losses in the Asian session, but has reversed directions and posted gains in European trade
  • 0.7100 was tested in support earlier and remains a weak line
  • There is resistance at 0.7213
  • Current range: 0.7100 to 0.7213

Further levels in both directions:

  • Below: 0.7100, 0.7012, 0.6931 and 0.6848
  • Above: 0.7213, 0.7385 and 0.7440

OANDA’s Open Positions Ratio

AUD/USD ratio is showing little movement, consistent with the lack of movement from AUD/USD. The ratio remains close to an even split between long and short positions. This indicates a lack of trader bias as to what 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.