AUD/USD – Aussie Higher as Markets Eye Fed, RBA

The Australian dollar has gains on Wednesday, as AUD/USD trades at the 0.71 line in the European session. In economic events, Australian Westpac Consumer Sentiment posted a sharp gain of 4.2%. On Wednesday, market focus will be on the central banks of the US and Australia. Janet Yellen will testify before the House Financial Services Committee in Washington. In Australia, RBA head Glenn Stevens testifies before the House Representatives Standing Committee on Economics in Sydney. These events could shake up the currency markets, so traders should be prepared for possible volatility from AUD/USD later in the day.

There was positive news out of Australia on Tuesday, as Westpac Consumer Sentiment sparkled with a 4.2% gain. This was the indicator’s first gain in three months. Stronger consumer confidence usually translates into increased spending by consumers, which is critical for economic growth. Australian business confidence is not looking as bright, as the NAB Business Confidence report dropped to 2 points in January, compared to 3 points a month earlier. These releases are consistent with the financial turmoil which has characterized the early weeks of 2016, and predictably, business confidence has waned.

The market spotlight will be squarely on Federal Reserve chair Janet Yellen on Wednesday and Thursday. Yellen will make the short trip from her office to Capitol Hill, where she could face some tough questions during her testimony before Congress. After a historic rate hike in December, the Fed remained on the sidelines in January, and its dovish policy statement reflected a softening in US economic growth. Does this mean a March rate move is off the table? Naturally, the Fed will not give a clear answer to this question, but the markets will be looking for some clarity from Janet Yellen about the Fed’s monetary plans. If Yellen paints a pessimistic picture of the economy, the US dollar could lose ground. It wasn’t long ago that the Fed was hinting about a series of rate hikes in 2016, but the recent turmoil in global markets has drastically changed these plans, with some experts openly questioning if the Fed will make any more moves before next year.

AUD/USD Fundamentals

Tuesday (Feb. 9)

• 18:18 Australian Westpac Consumer Sentiment. Actual 4.2%
• 19:00 Australian HIA New Home Sales. Estimate 6.0%

Wednesday (Feb. 10)

• 10:00 Federal Reserve Chair Janet Yellen Testifies
• 10:30 US Crude Oil Inventories. Estimate 3.1M
• 13:01 US 10-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate 10.3B
• 19:00 Australian Inflation Expectations

Upcoming Key Events

Thursday (Feb. 11)

• 10:00 Federal Reserve Chair Janet Yellen Testifies
• 19:30 RBA Governor Glenn Stevens Speaks 

*Key releases are highlighted in bold

*All release times are EST

AUD/USD for Wednesday, February 10, 2016

AUD/USD February 10 at 7:15 EST

AUD/USD  Open: 0.7063 Low: 0.7038  High: 0.7125 Close: 0.7099

AUD/USD Technical

• In the Asian session, AUD/USD was uneventful. The pair has posted slight gains in the European session.
• 0.7100 was tested in resistance and remains under pressure
• 0.7012 is providing support, protecting the round number of 0.7000
• Current range: 0.7012 to 0.7100

Further levels in both directions:

• Below: 0.7012, 0.6931 and 0.6848
• Above: 0.7100, 0.7213 and 0.7385

OANDA’s Open Positions Ratio

AUD/USD ratio is showing little movement, consistent with the lack of significant movement from the pair. Long positions have a majority (53%), indicative of trader bias towards the AUD/USD continuing to gain 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.