Aussie Gains Continues on Solid Retail Sales

The Australian dollar is higher on Friday, as AUD/USD trades at 0.7380 early in the European session. On the release front, Australian Retail Sales improved in January, with a gain of 0.3%. The market focus in the North American session will be on US job numbers, led by Nonfarm Payrolls. The markets are expecting a strong turnaround in the upcoming release, with an estimate of 195 thousand.

The Aussie continues enjoying its best week in months, having posted a rally of over 260 points. AUD/USD is knocking on the 0.74 doorstep and is at its highest level since August. Retail Sales climbed 0.3%, improving nicely from the previous reading of 0.0%. GDP posted a respectable gain of 0.6% in the fourth quarter. On an annual basis, GDP growth in 2015 was 2.4%, only marginally lower than the growth rate of 2.5% in 2014. Earlier this week, there were no surprises from the RBA, which held the benchmark rate at the round number of 2.00%. The RBA statement was optimistic but cautious in tone, noting that there was “reasonable prospects for continued growth” and that the employment picture had shown improvement. Despite the RBA’s optimism, the inflation picture remains feeble, and with the RBA maintaining its easing bias, we could see at least one rate cut this year.

All eyes are on the US Nonfarm Payroll release on Friday. This event is one of the most important economic indicators and any unexpected reading could have a strong impact on the currency markets. This week’s employment numbers have been mixed. ADP Nonfarm Payrolls improved to 214 thousand, crushing the estimate of 185 thousand. This was followed by a disappointing Unemployment Claims release, which missed expectations and climbed higher for a second straight week. Which direction will we see from the key NFP report? The markets are expecting a sharp rebound in July, with a forecast of 195 thousand, close to the important 200-thousand level. A strong reading could revive speculation about a March rate hike by the Federal Reserve, but such a scenario remains unlikely, barring a spectacular surge in employment and inflation indicators in the next two weeks, leading up to the Fed’s policy meeting. In the rosy days of December, when the Fed raised rates by 0.25%, there was talk of a series of hikes over the course of 2016, but the US economy has since softened, so another upward move by the Fed could be some time away.

AUD/USD Fundamentals

Thursday (March 3)

  • 19:30 Australian Retail Sales. Estimate 0.4%. Actual 0.3%

Friday (March 4)

  • 8:30 US Average Hourly Earnings. Estimate 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 195K
  • 8:30 US Unemployment Rate. Estimate 4.9%
  • 8:30 US Trade Balance. Estimate -43.5B

*Key releases are highlighted in bold

*All release times are EST

AUD/USD for Friday, March 4, 2016

AUD/USD March 4 at 7:30 EST

AUD/USD  Open: 0.7358 Low: 0.7340  High: 0.7389 Close: 0.7384

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.7012 0.7100 0.7213 0.7385 0.7440 0.7533
  • AUD/USD has posted small gains in the Asian and European sessions
  • 0.7213 has some breathing room in support as the AUD/USD continues to post gains
  • There is resistance at 0.7385
  • Current range: 0.7213 to 0.7385

Further levels in both directions:

  • Below: 0.7213, 0.7100, 0.7012 and 0.6931
  • Above: 0.7385, 7440 and 0.7533

OANDA’s Open Positions Ratio

The AUD/USD ratio is pointing to movement towards short positions, as gains by AUD/USD has led to the covering of short positions. These positions have a slight majority (59%), which is indicative of trader bias towards AUD/USD reversing directions and moving lower.

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.