AUD/USD – Sliding Aussie Trading at 9-Week Lows

The Australian dollar has posted losses to start off the new trading week. AUD/USD is trading at 0.7330 in the European session. On the release front, it’s a very quiet start to the week. Australian ANZ Job Advertisements declined 0.8%. The sole US event on the schedule is the Labor Markets Conditions Index.

The Aussie suffered a dismal week, losing 230 points against the US dollar. The RBA had a major hand in the currency’s woes, first with a rate cut, followed by a dovish quarterly policy statement. On Tuesday, the RBA surprised the markets with a surprise quarter point cut, lowering rates from 2.00% to 1.75%. In the RBA policy statement released on Friday, the central bank lowered its inflation forecast. The RBA’s revised forecast anticipates inflation between 1 and 2 percent in 2016, and between 1.5 percent to 2.5 percent through mid-2018. In its February statement, the RBA had predicted inflation running between 2 percent and 3 percent, which is the central bank’s official inflation target. This points to serious concern on the part of the RBA regarding the inflation picture. The RBA has expressed its concern about the high value of the Australian dollar, so it certainly doesn’t mind last week’s sharp losses. What’s next for the RBA? Many analysts are saying that the RBA  isn’t done and another quarter point cut is imminent. However, with a national election scheduled for July, the RBA is expected to hold off from any further monetary moves until August.

Is the US labor market in trouble? Nonfarm Payrolls looked awful in April, as the key indicator slid to just 160 thousand, well short of the forecast of 203 thousand. This marked the lowest reading in seven months. There was concern that NFP, one of the most important indicators, would post soft numbers after weak job numbers earlier this week. The ADP Nonfarm Payroll report dropped to 156 thousand, compared to an estimate of 205 thousand and Unemployment Claims jumped to 274 thousand, missing the estimate of 261 thousand. In other releases on Friday, wage levels showed no change, as Average Hourly Earnings posted a weak gain of 0.3%. The unemployment rate remained steady at 5.0%.

Will the Federal Reserve raise rates in the near future? In its April policy statement, the Fed didn’t raise rates, but the message to the markets with regard to the US economy was one of cautious optimism. The statement noted continuing improvement in the labor market but added that it was keeping a watchful eye on low inflation levels. The Fed appeared to leave the open to a June hike, but the weak payrolls report has greatly reduced the likelihood of a June move. On Friday, New York Fed president William Dudley said he remains confident that the Fed could raise rates as much as twice this year, but many analysts are skeptical if the Fed will raise rates before 2017.

AUD/USD Fundamentals

Sunday (May 8)

  • 21:30 Australian ANZ Job Advertisements. Actual -0.8%

Monday (May 9)

  • 10:00 US Labor Markets Conditions Index

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Monday, May 9, 2016

AUD/USD May 9 at 8:20 EDT

Open: 0.7372 Low: 0.7335 High: 0.7386 Close: 0.7326

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.7049 0.7160 0.7251 0.7339 0.7472 0.7560
  • AUD/USD was flat in the Asian session. The pair has posted losses in European trade
  • 0.7251 is providing support
  • 0.7339 remains fluid and has switched to resistance. It is a weak line
  • Current range: 0.7251 to 0.7339

Further levels in both directions:

  • Below: 0.7251, 0.7160 and 0.7049
  • Above: 0.7339, 0.7472, 0.7560 and 0.7678

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged on Monday. Long positions have a slight majority (54%), indicative of trader bias towards AUD/USD reversing directions and climbing 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.

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.