The Australian dollar is subdued on Friday, as AUD/USD trades at 0.7017 in the European session. On the release front, Australian Retail Sales remained steady with a gain of 0.4%, matching the forecast. In the US, today’s key event is Nonfarm Payrolls, which could have a sharp impact on the currency markets. The estimate stands at 203 thousand, weaker than the previous reading of 211 thousand.
The first week of January has been terrible for the Australian dollar, which has lost close to 300 points against the US dollar, and is trading close to its lowest levels since October 2014. AUD/USD has recorded daily losses every day this week. The Aussie has been steamrolled early in 2016 as nervous investors have dumped minor currencies like the Australian dollar in favor of the safe-haven US dollar. The plunge was precipitated by disappointing Chinese manufacturing data early in the week, underscoring weak demand from the world’s number two economy. This is bad news indeed for the Australian economy, as China is Australia’s largest trading partner. Australian Building Approvals, a key release, posted a sharp decline in November, which further weakened the Aussie. Market jitters intensified as tensions rose between Iran and Saudi Arabia and a nuclear device test by North Korea. Adding fuel to the fire, China has devalued the yuan by over 0.5%, triggering another bout of risk-aversion by investors.
The markets continue to keep a close eye on US employment numbers, with Nonfarm Payrolls and the Unemployment Rate being released later on Friday. An unexpected NFP reading could have a sharp impact on the direction of AUD/USD, so we could see some volatility in the North American session. Earlier in the week, ADP Nonfarm Payrolls surged to 257 thousand in December. This crushed the forecast of 193 thousand, and was the strongest gain since June 2014. This week’s employment readings will be carefully monitored by the Federal Reserve, and strong numbers will increase speculation about another rate hike early in 2016.
The Federal Reserve released the minutes of its historic December policy meeting, at which it raised rates by 0.25 percent. The minutes were noteworthy in highlighting differences among policymakers as to whether US inflation levels will improve. Indeed, some FOMC members said that their vote in favor of a rate hike was a close call because of concerns that low inflation levels will continue in 2016. What’s next? The Fed has hinted that the December rate is the first of a series of incremental moves in 2016, but inflation levels will play an important role in the timing and size of future rate hikes.
Thursday (Jan. 7)
- 19:30 Australian Retail Sales. Estimate 0.4%. Actual 0.4%
Friday (Jan. 8)
- 8:30 US Average Hourly Earnings. Estimate 0.2%
- 8:30 US Nonfarm Employment Change. Estimate 203K
- 8:30 US Unemployment Rate. Estimate 5.0%
*Key releases are highlighted in bold
*All release times are EST
AUD/USD for Friday, January 8, 2016
AUD/USD January 8 at 11:20 GMT
AUD/USD 0.7017 H: 07074 L: 0.7013
- AUD/USD posted gains in the Asian session but has retracted in European trade
- 0.7063 remains a weak resistance line
- 0.6931 is providing support
- Current range: 0.6931 to 0.7063
Further levels in both directions:
- Below: 0.6931, 0.6848 and 0.6754
- Above: 0.7063, 0.7100, 0.7213 and 0.7349
OANDA’s Open Positions Ratio
AUD/USD ratio is unchanged, as long positions have a majority of 59%. A majority of long positions is indicative of trader bias towards the pair reversing its sharp slide and moving higher.