AUD/USD: Aussie Drop Continues Despite Strong Australian Business Confidence

The Australian dollar continues to lose ground on Tuesday, as AUD/USD trades at 0.7215 in the North American session. The Aussie has given up most of last week’s gains, having lost over 100 points in the past two days. In economic news, Australian NAB Business Confidence improved to 5 points. Over in the US, JOLTS Jobs Openings slipped to 5.38 million, well below expectations. Later on Tuesday, we’ll get a look at Australian Westpac Consumer Sentiment.

Australian NAB Business Confidence rebounded in November, posting a gain of 5 points, which indicates optimism in the business sector. This was up from 2 points a month earlier. In the US, employment numbers were surprisingly weak, as JOLTS Job Openings fell to 5.38 million in October, compared to 5.53 million a month earlier. This was nowhere near the estimate of 5.59 million. The combination of positive Australian data and weak US numbers wasn’t enough to stem the Aussie’s slide, as the currency continues to weaken on Tuesday.

With a Federal Reserve rate hike widely expected next week, Friday’s Nonfarm Payrolls report took on added significance. The key indicator dropped to 211 thousand in November, much lower than the previous release of 271 thousand. Still, this was good enough to beat the estimate of 201 thousand. This indicator is often a market-mover, and the positive reading will lend support to Federal Reserve policymakers who are in favor of raising interest rates later this month. The Federal Reserve will obviously not confirm that a rate hike is imminent, but Fed chair Janet Yellen testified on Capitol Hill on Thursday, and signaled that a rate increase is likely in December, barring some unforeseen disastrous economic data before the rate decision on December 16. Last week, Yellen added that the Fed is satisfied with the progress shown by the US labor market and “looked forward” to a rate hike. Persistently low inflation levels have hampered the recovery and are well below the Fed target of 2 percent, and is a key reason why the Fed did not raise rates earlier this year. However, Yellen stated that she expects inflation numbers to improve, so weak inflation is unlikely to be an impediment to an historic rate hike, with Fed Funds futures pricing in a 79% chance of an increase.

US PMI reports, key gauges of economic activity, disappointed last week. On Tuesday, ISM Manufacturing PMI slipped to 48.6 points in November. This figure fell short of the estimate of 50.6 points, and marked the first contraction of the index since May 2013. Recent manufacturing releases were also soft, as the US manufacturing sector continues to struggle. There wasn’t any relief from ISM Non-Manufacturing PMI on Thursday, as the index slipped to 55.9 points, well short of the forecast of 58.1 points. This marked a six-week low for the indicator. The silver lining is that although the index took a hit in November, the reading was still above the 50 line, indicative of expansion.

AUD/USD Fundamentals

Tuesday (Dec. 8)

• 00:30 Australian NAB Business Confidence. Actual 5 points
• 11:00 US NFIB Small Business Index. Estimate 96.6 points. Actual 94.8 points
• 15:00 US JOLTS Job Openings. Estimate 5.59M. Actual 5.38M
• 15:00 US IBD/TIPP Economic Optimism. Estimate 45.2 points. Actual 47.2 points
• 23:30 Australian Westpac Consumer Sentiment 

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD for Tuesday, December 8, 2015

AUD/USD December 8 at 17:35 GMT

AUD/USD 0.7215 H: 0.7270 L: 0.7185

AUD/USD Technical

• AUD/USD posted losses in the Asian and European sessions. The pair has steadied in North American trade.
• 0.7215 was tested earlier in support and is under strong pressure as the pair continues to lose ground. It could break during the North American session.
• 0.7349 has strengthened in resistance.
• Current range: 0.7213 to 0.7349

Further levels in both directions:

• Below: 0.7213, 0.7100 and 0.7063
• Above: 0.7349, 0.7440, 0.7526 and 0.7644

OANDA’s Open Positions Ratio

AUD/USD ratio is showing strong gains by short positions this week, as short positions currently have a majority (54%). This is consistent with the sharp losses by the Aussie this week, which has led to the covering of numerous short positions. The majority of short positions is indicative of trader bias towards the Australian dollar continuing to lose 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.