AUD/USD – Aussie Drifting, Australian Business Confidence Slides

The Australian dollar is showing little movement on Tuesday, as AUD/USD trades at 0.7030 in the North American session. In economic news, Australian NAB Business Confidence dropped to 2 points. In the US, NFIB Small Business Index met expectations, while Import Prices disappointed with a fifth straight decline.

Australian NAB Business Confidence disappointed in October, dropping to 2 points. This was well off the estimate of 5 points a month earlier, and points to weakness in business sentiment. This is a closely-watched indicator, as weaker business confidence often translates into decreased hiring and spending, which in turn can have a negative ripple effect throughout the economy. Elsewhere, Chinese inflation dropped to 1.3% in October, short of the estimate and the lowest reading in five months. Is the Chinese slowdown getting worse? If so, the weak Aussie could be headed below the 0.70 symbolic level. We’ll get a look at Chinese Industrial Production on Wednesday.

The US dollar posted broad gains last week, courtesy of the outstanding Nonfarm Payroll report on Friday. The key indicator surprised the markets with a surge of 271 thousand, crushing the forecast of 181 thousand. It was the indicator’s best showing since May. As well, hourly wages were up 0.4%, bringing the annual increase to 2.5%, and the unemployment rate dipped to 5.0%. These excellent readings are further signs that the US economy is close to full employment. The positive news continued on Monday, as the US Labor Market Conditions Index gained 1.6 points in October, up from a flat reading of 0.0 points a month earlier.

Given that the Federal Reserve said in its recent policy statement that it employment data would be an important factor in a rate decision, the strong NFP reading on Friday has greatly increased the likelihood of a Fed hike. The US dollar posted broad gains as a result, and the yen closed the week above the 123 line. Still, a Fed rate hike should not be considered a done deal, as not all US releases have been as strong as employment data, such as manufacturing and inflation numbers. Low inflation points to slack in the economy, and the Fed policymakers will need to be assured that the US economy can withstand an interest rate hike before voting in favor of raising rates.

AUD/USD Fundamentals

Monday (Nov. 9)

• 00:30 Australian NAB Business Confidence. Actual 2 points.
• 11:00 US NFIB Small Business Index. Estimate 96.4 points. Actual 96.1 points 
• 13:30 US Import Prices. Estimate -0.1%. Actual -0.5%
• 15:00 US Wholesale Inventories. Estimate 0.0%. Actual 0.5%
• 18:01 US 10-year Bond Auction. Actual 2.30%
• 19:30 US FOMC Member Charles Evans Speaks

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD for Tuesday, November 10, 2015

AUD/USD November 10 at 18:50 GMT

AUD/USD 0.7035 H: 0.7064 L: 0.7019

AUD/USD Technical

• AUD/USD posted slight gains in the Asian session, and has posted marginal movement in the European and North American session.
• The round number of 0.700 is a weak support level.
• 0.7063 is a weak resistance line.
• Current range: 0.7000 to 0.7063

Further levels in both directions:

• Below: 0.7000, 0.6931 and 0.6801
• Above: 0.7063, 0.7100, 0.7213 and 0.7440

OANDA’s Open Positions Ratio

AUD/USD ratio is showing movement towards long positions, which have a strong majority (59%). This is indicative of trader bias in favor of the Australian dollar moving to higher levels.

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.