AUD/USD – Aussie Unchanged, Markets Eye RBA Minutes

The Australian dollar is unchanged on Friday, as the pair trades just under the 0.74 line in the North American session. On the release front, it’s a quiet end to the week. In the US, today’s key event is Building Permits, with the markets expecting the indicator to improve to 1.15 million. As well, Housing Starts will also be released. There are no Australian releases on Friday, but we’ll get a look at the RBA policy meeting minutes on Monday, which could affect the direction of AUD/USD.

US inflation and employment numbers were soft on Thursday. Core CPI and CPI, the primary gauges of consumer inflation, both posted small gains of 0.2%, within expectations. The Federal Reserve continues to insist that inflation will head towards its target of 2.0 percent, but given current inflation levels are not much above zero, it’s hard to see this happening, absent a huge surge by the US economy. Meanwhile, Unemployment Claims increased to 277 thousand, above the estimate of 267 thousand. This marked a four-week high, and once again raises questions about the strength of the US labor market. The employment picture appeared to be very bright in early 2016, but the Nonfarm Payrolls report of just 38 thousand in May shocked the markets and could delay a rate hike by the Federal Reserve.

There were no surprises from the Federal Reserve at the conclusion of its policy meeting on Wednesday. The Fed opted for the sidelines, maintaining the benchmark rate at 0.25%, where it has been pegged since December 2015. A dismal Nonfarm Payrolls report and dovish statements from Fed chair Janet Yellen and her colleagues had all but decimated any chance of a June hike. Back in April, Fed chair Janet Yellen had renewed hopes of rate hike in the summer, when she said that she expected a rate hike in “the coming months”. The Fed’s tone has drastically changed since then, and there is a strong likelihood that the Fed will raise rates only once in 2016. The Fed statement did not shed any light on the timing of a rate hike, although many analysts are circling September in their calendars. The statement was cautious in tone, stating that the Fed expects US inflation levels to remain at low levels in the near term. As well, the Fed lowered its rate path outlook for 2016 and 2017. Gone are the heady days in December, when the Fed hinted that it could raise rates up to four times in 2016. Many analysts were skeptical about this rosy prediction, and it appears that the Fed was overly optimistic about the strength of the US economy. This “lack of sync” between the Fed and the markets regarding the US economy could hurt the credibility of the Fed, although to her credit, Yellen has made strong efforts to communicate clearly with the markets, in sharp contrast to the undecipherable “Fedspeak”, perfected by former Fed chair Allan Greenspan.

Australia posted strong job numbers in May. Employment Change jumped higher, with a reading of 17.9 thousand, above the forecast of 14.9 thousand. The unemployment rate remained steady, posting a rate of 5.7% for the third straight month. However, most of the new jobs were part-time positions. Analysts have identified a troubling trend in the labor market, as part-time employment is growing while full-time employment is on the decrease. This trend has led to downward pressure on wages, as wage growth in the first quarter year-on-year dipped from 2.2 percent to 2.1 percent. Meanwhile, New Motor Vehicle Sales, an important gauge of consumer spending, declined 1.1%, marking the third decline in four months.

Friday (June 17)

• 8:30 US Building Permits. Estimate 1.15M
• 8:30 US Housing Starts. Estimate 1.15M

Monday (June 20)

21:30 RBA Monetary Policy Meeting Minutes

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Friday, June 17, 2016

AUD/USD June 17 at 7:35 EDT

Open: 0.7392 Low: 0.7370 High: 0.7404 Close: 0.7392

AUD/USD Technical

• AUD/USD has shown limited movement in the Asian and European sessions
• There is resistance at 0.7472
• 0.7339 is providing support
• Current range: 0.7339 to 0.7472

Further levels in both directions:

• Below: 0.7339, 0.7251, 0.7160 and 0.7011
• Above: 0.7472, 0.7612 and 0.7739

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged on Friday, consistent with the lack of movement from AUD/USD. Long positions command a majority (57%), indicative of trader bias towards AUD/USD reversing directions and moving to higher ground.

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.