AUD/USD – Aussie Gains Continue on Positive RBA Minutes

The Australian dollar has posted considerable gains on Tuesday, as the pair trades slightly below the 0.75 line. On the release front, the RBA will release the minutes of its recent policy meeting. In the US, there are no economic releases for a second straight day. The markets will be listening closely to Federal Reserve Chair Janet Yellen ,who will appear before the Senate Banking Committee and answer questions about the Fed’s Monetary Policy Report.

The RBA minutes from its June policy meeting were upbeat in tone and have boosted the Aussie on Tuesday. In the minutes, policymakers said that stronger economic data and a weaker Australian dollar had allowed the RBA to stay on the sidelines and maintain the benchmark rate at 1.75%. Will the RBA lower rates in the next few months? Australia’s economy has shown signs of improvement recently, as 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 had strongly hinted that it was planning to lower rates, but the stronger economy has given it some room to hold current rate levels. 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.

In or Out? That is the burning question facing millions of Britons, who will go to the polls on Thursday, as the UK votes in a historic referendum on whether to remain in the EU. The campaign between the “In” and “Out” camps will go down to the wire, as polls predict a close vote. The British pound, which has become a barometer of the vote, has posted gains against the US dollar and the yen on Tuesday, bolstered by recent polls which show the “In” camp with a slight lead. Prime Minister David Cameron and prominent business leaders have warned that that a vote to leave the EU would hurt the UK economy, and a recent Treasury report says an EU exit will wipe out 800,000 jobs in the UK and cause a recession. The “Out” camp counters that EU over-regulation has stifled British businesses, and point to countries such as Switzerland that have close economic relations with the EU but are not part of the bloc. Still, leaving the comfort zone of the EU would be a journey into the unknown, and analysts predict that if the UK exits the EU, the pound could dive by as much as 10 percent.

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.

Monday (June 20)

  • 21:30 RBA Monetary Policy Meeting Minutes
  • 21:30 Australian HPI. Estimate +0.8%. Actual -0.2%

Tuesday (June 21)

  • 10:00 Federal Reserve Chair Janet Yellen Testifies
  • 14:30 US FOMC Member Jerome Powell Speaks
  • 20:30 MI Leading Index

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Tuesday, June 21, 2016

AUD/USD June 21 at 10:15 EDT

Open: 0.7456 Low: 0.7504 High: 0.7504 Close: 0.7496

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.7251 0.7339 0.7472 0.7612 0.7739 0.7835
  • AUD/USD was flat in the Asian session and has posted gains in European trade
  • 0.7472 is a weak 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 unchanged on Tuesday. 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.

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.