AUD/USD – Aussie Higher, RBA Minutes Next

The Australian dollar has posted considerable gains on Monday, as the pair trades at 0.7470 in the North American session. On the release front, it’s a quiet start to the week. Later on Monday, the RBA will release the minutes of its recent policy meeting. There are no US releases on the schedule. On Tuesday, Federal Reserve chair Janet Yellen will appear before the Senate Banking Committee in Washington.

The RBA will release the minutes of its June policy meeting, at which it held rates at 1.75%. Australia’s growth in the first  quarter has given the RBA some breathing room as it avoided lowering rates for a second straight month. Australian GDP grew an impressive 3.1% in Q1 year-on-year, its strongest gain in three years. There was more positive news on Friday, as Employment Change improved to 17.9 thousand, beating the estimate of 14.9 thousand. The RBA will hold a policy meeting on July 5, but is unlikely to take any action, as the meeting takes place just days after the national election.

With the Fed opting to stand pat again in June, the markets are speculating on the timing of another rate hike. In the heady days of December when the Fed raised interest rates, there was talk of up to four hikes in 2016. Fast forward to June, and the Fed hasn’t made a move so far this year. Many analysts are predicting only one hike in 2016, but on Friday, St. Louis Fed President James Bullard said that the economy may need just one hike in the next 2-1/2 years. Bullard did not mince words, bluntly stating that the Fed had done a poor job in its predictions about the US economy, and said the markets have no faith in the Fed’s “dot plot” of projected interest rate policy, as the Fed’s actual pace of rate hikes was much slower than its projections. Bullard added that this “mismatch” between words and action had caused distortions in the global financial markets and eroded credibility in the Federal Reserve.

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.

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.

Monday (June 20)

• 10:30 Australian CB Leading Index
• 19:25 RBA Assistant Governor Guy Debelle Speaks
• 21:30 RBA Monetary Policy Meeting Minutes

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Monday, June 20, 2016

AUD/USD June 20 at 9:15 EDT

Open: 0.7427 Low: 0.7424 High: 0.7473 Close: 0.7476

AUD/USD Technical

• AUD/USD has posted gains in the Asian and European sessions
• 0.7472 remains fluid and is currently a weak support line. It could see further action in the North American session
• There is resistance at 0.7612
• Current range: 0.7472 to 0.7612

Further levels in both directions:

• Below: 0.7472, 0.7339, 0.7251 and 0.7160
• Above: 0.7612, 0.7739 and 0.7835

OANDA’s Open Positions Ratio

AUD/USD ratio is showing movement towards long positions on Monday. Long positions command a majority (61%), indicative of trader bias towards AUD/USD continuing to move towards 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.