The Australian dollar has posted sharp losses on Friday, as AUD/USD trades at 0.6880 in the European session. On the release front, Australian Home Loans posted a strong gain of 1.8%, but this strong reading couldn’t stop the Aussie’s tumble. In the US, there four key releases today, with reports covering inflation, retail sales and consumer confidence. Traders should be prepared for the possibility of further movement from AUD/USD during the North American session.
The Australian dollar has gone from bad to worse in the month of January, with the minor currency plunging some 400 points in 2016. AUD/USD is currently trading at its lowest level since September 2004, and the downward spiral could continue. Recent events in China have weakened the Aussie, with the Chinese stock market meltdown and the devaluation of the Chinese yuan. Geopolitical tensions in Korea, the Persian Gulf and Indonesia have also contributed to significant movement away from minor currencies like the Aussie, towards the safe-haven US dollar. December employment data from Australia was decent, but failed to stop the Aussie’s slide. Employment Change declined by 1000, but this was much better than the estimate of 11,000. The unemployment rate remained steady at 5.8%. With investors remaining jittery about China and geopolitical tensions, there is little appetite for risk and the Australian dollar’s descent could continue.
Is the Federal Reserve planning another rate hike? The Fed raised interest rates in December for the first time in nine years, and hinted that this move was the first of a series in 2016. Not surprisingly, this has led to intense market speculation as to the timing of another rate hike. Many experts are forecasting another hike in March, contingent on a strong US economy. The Fed has hinted that it could raise rates up to four times in 2016, but experts like Chase Chief Economist Anthony Chan argue that is an unlikely scenario. A rate hike in late January is not considered likely, coming so soon after the December move. A hike by the Fed in March is more probable, contingent of course on a strong US economy. Although the economy is in good shape, one major area of concern is the inflation picture. Inflation levels have not kept up with other economic indicators and remain at low levels. The minutes of the December meeting indicated that some Fed members strongly considered voting against a rate hike due to weak inflation. Another concern is a lack of wage growth, despite a robust labor market. This was underscored by the last Average Hourly Earnings report, which came in at a flat 0.0% in December. The Fed will be keeping a close eye on inflation and wage growth data before reaching a decision to raise rates for a second time.
Thursday (Jan. 14)
- 19:30 Australian Home Loans. Estimate -0.4%. Actual +1.8%
Friday (Jan. 15)
- 8:30 US Core Retail Sales. Estimate 0.2%
- 8:30 US PPI. Estimate -0.2%
- 8:30 US Retail Sales. Estimate -0.1%
*Key releases are highlighted in bold
*All release times are EST
AUD/USD for Friday, January 15, 2016
AUD/USD January 15 at 6:40 EST
AUD/USD Open: 0.6995 Low: 0.6863 High: 0.6995 Close: 0.6880
- 0.6848 has weakened in support
- 0.6931 is the next resistance line
- Current range: 0.6848 to 0.6931
Further levels in both directions:
- Below: 0.6848, 0.6754 and 0.6625
- Above: 0.6931, 0.7063, 0.7100 and 0.7213
OANDA’s Open Positions Ratio
AUD/USD ratio remains unchanged, despite sharp losses by the pair on Friday. Long positions command a majority of positions (61%), indicative of trader bias towards the pair continuing to move higher.