It’s been a quiet day on the currency markets, and the Australian dollar has been no exception, as AUD/USD is showing limited movement on Monday. In the North American session, the pair is trading at 0.7180. There are no Australian or US releases on Monday. Given the lack of economic cues, we’re unlikely to see much activity from the pair during the day. The markets are now focused on US Final GDP, which will be released on Tuesday. With only one Australian release this week, US numbers will play a key role in what direction the pair takes this week.
After months of anticipation in the markets, the Federal Reserve raised interest rates by 0.25 percent last week, the first upward move since June 2006. The Fed dropped a broad hint in its October policy meeting about a rate hike before the end of 2015, and predictably, investors and traders were busy trying to guess whether the Fed would indeed press the rate trigger. To the credit of Fed chief Janet Yellen and her colleagues, the Fed put into place a carefully-crafted strategy, sending a steady of stream of signals that it was intending to tighten monetary policy, if economic conditions remained positive. This gave the markets ample time to price in a rate hike, and currency market volatility was not excessive after the US rate hike, the first in almost 10 years.
The rate hike of just 0.25 percent is expected to have limited economic impact, but the psychological aspect of the rate move cannot be overemphasized, as the Fed has given the US economy a critical vote of confidence, and has indicated that additional rates are likely over the course of 2016. The Fed’s strategy contrasts sharply with the bungled approach of Mario Draghi at the ECB, who hinted that the ECB would take significant easing steps at its December meeting, but failed to deliver as the ECB did little more than extend the current QE program for another six months. This led to complete turmoil in the markets, resulting in the euro surging by as much as 500 points before it leveled off.
Monday (Dec. 21)
There are no US or Australian releases on Monday.
Upcoming Key Events
Tuesday (Dec. 22)
- 13:30 US Final GDP. Estimate 1.9%
*Key releases are highlighted in bold
*All release times are GMT
AUD/USD for Monday, December 21, 2015
AUD/USD December 21 at 16:20 GMT
AUD/USD 0.7178 H: 0.7195 L: 0.7154
- AUD/USD has shown limited movement throughout the day.
- 0.7213 remains a weak resistance line
- The round number of 0.7100 is providing support
- Current range: 0.7100 to 0.7213
Further levels in both directions:
- Below: 0.7100, 0.7063 and 0.6931
- Above: 0.7213, 0.7349, 0.7440 and 0.7526
OANDA’s Open Positions Ratio
AUD/USD ratio is close to a split between long and short positions, indicative of a lack of trader bias as to which direction the pair will head next.