AUD/USD – Aussie Steady, US Jobless Claims Beat Expectations

The Australian dollar has posted gains on Thursday, continuing the upward movement in the Wednesday session.  AUD/USD is trading at the 0.75 line early in the North American session. On the release front, Australian MI Inflation Expectations dipped to 3.4%. Chinese CPI jumped to 2.3%, well above expectations. In the US, Unemployment Claims improved, dropping to 259 thousand.

The Australian dollar is sensitive to key Chinese numbers, as the Asian giant is Australia’s largest trading partner. Chinese CPI posted a sharp gain in February of 2.3%, its best gain since March 2o14. This is certainly positive news, but market reaction was muted, since this reading could mark a one-time spike due to a surge in Chinese food consumption to celebrate the Lunar New Year. The next key Chinese release is Industrial Production on Saturday, with the markets braced for a reading of 5.6%, compared to the previous reading of 5.9%.

The month of March has been kind to the Aussie, which has surged 350 points. AUD/USD is knocking on the door of the 0.75 line, its highest level since July 2015. The currency has struggled in recent months, hard hit by the China slowdown and uncertainty in the markets with the plunge in oil prices. However, the pair has rebounded back with a vengeance as oil prices have improved, global markets have steadied, and investors appear to be more comfortable holding risk assets like the Aussie. NAB Business Confidence edged up to 3 points, up from 2 points a month earlier. Consumer confidence could not keep up, as Westpac Consumer Sentiment slipped 2.2%, compared to a 4.2% gain a month earlier. The RBA’s continues to maintain an easing bias, and this week Deputy Governor Philip Lowe stated that this policy is unlikely to change, noting that weak wage growth continues to weigh on inflation levels.

US Nonfarm Payrolls is one of the most important economic indicators, so an excellent January report should have buoyed the US dollar at against its major rivals late last week. The indicator impressed with a reading of 242 thousand, much higher than the estimate of 195 thousand. This was much stronger than the previous (revised) reading of 171 thousand. The US economy has added an average of 225,000 jobs per month since December, an impressive number considering that the economy has softened in the early part of 2016. Why then, did a stellar NFP release not impress the markets? The reason was that wage growth, which has consistently lagged behind other employment indicators, surprised the markets with a decline of 0.1% in January, the first drop in wages since December 2014. This indicator is closely linked to inflation, since an increase in wages means workers have more money to spend. The indicator’s decline means that that Federal Reserve’s inflation target of about 2.0% remains far off, so the Fed, which is keeping a close eye on the weak inflation picture, is unlikely to press the rate trigger at its policy meeting later this month.

AUD/USD Fundamentals

Thursday (March 10)

• 8:30 US Unemployment Claims. Estimate 272K. Actual 259K
• 10:30 US Natural Gas Storage. Estimate -51B
• 13:01 US 30-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate -198.3B

*Key releases are highlighted in bold

*All release times are EST

AUD/USD for Thursday, March 10, 2016

AUD/USD March 10 at 9:30 EST

AUD/USD  Open: 0.7465 Low: 0.7507  High: 0.7455 Close: 0.7465

AUD/USD Technical

• AUD/USD has shown limited movement during the day
• 0.7472 remains busy and has switched to a resistance line. It could see further action in the North American session
• 0.7385 is providing support
• Current range: 0.7385 to 0.7472

Further levels in both directions:

• Below: 0.7385, 0.7213 and 0.7100
• Above: 0.7472, 0.7560, 0.7678 and 0.7796

OANDA’s Open Positions Ratio

The AUD/USD ratio is showing little movement, consistent with the lack of movement from AUD/USD. Long positions have a majority (54%),  indicative of trader bias towards AUD/USD moving higher.

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.