AUD/USD – Aussie Rally Sputters as Consumer Confidence Slides

The Australian dollar has posted slight losses on Wednesday, putting the breaks on a strong rally which started late last week. AUD/USD is trading at 0.7660 in the European session. In economic news, Australian Westpac Consumer Sentiment disappointed, declining by 4.0%.  We’ll get a look at key employment numbers later on Wednesday, with release of Employment Change and the unemployment rate.

The Australian consumer remains pessimistic about economic conditions according to the Westpac Consumer Sentiment Index. In March, the indicator slid 4.4%, following a decline of 2.2% a month earlier. Consumer confidence is closely linked to consumer spending, a key engine of economic growth. Australia is already reeling from weak global demand, in particular the Chinese slowdown. Weaker domestic demand would spell more trouble for the economy and could weaken the Australian dollar. Earlier this week, there was better news from the business sector, as NAB Business Confidence jumped to 6 points in March, compared to 3 points a month earlier. This marked the indicator’s strongest showing since June 2015. We’ll get a look at key employment numbers on Thursday, with release of Employment Change and the unemployment rate.

After an uneventful start to trading week, the markets will finally get a look at key US numbers later on Wednesday. The US releases Retail Sales, the primary gauge of consumer spending, as well as PPI, which measures inflation in the manufacturing sector. All three indicators are expected to rebound with gains in the March reports, after posting declines in February. These releases will be followed by CPI on Thursday. These consumer spending and inflation releases could play an important role concerning the Federal Reserve’s decisions regarding rate hikes. The Fed, which has sent out a decidedly dovish message about the US economy, has greatly lowered expectations about a rate hike in April, but a move in June is still on the table. Although US inflation levels have shown some improvement, they are nowhere near the Fed target of 2.0%. If this week’s inflation numbers beat expectations, speculation about a June hike will intensify, and the US dollar could post gains.

AUD/USD Fundamentals

Tuesday (April 12)

• 20:11 Australian Westpac Consumer Sentiment. Actual -4.0%

Upcoming Key Events

Wednesday (April 13)

• 8:30 US Core Retail Sales. Estimate 0.4%
• 8:30 US PPI. Estimate 0.3%
• 8:30 US Retail Sales. Estimate 0.1%
• 8:3o US Core PPI. Estimate 0.1%
• 10:00 US Business Inventories. Estimate 0.1%
• 10:30 US Crude Oil Inventories. Estimate 0.9M
• 13:01 US 10-year Bond Auction
• 14:00 US Beige Book
• 21:00 Australian MI Inflation Expectations
• 21:30 Australian Employment Change. Estimate 18.6K
• 21:30 Australian Unemployment Rate. Estimate 5.9%

Upcoming Key Events

Thursday (April 14)

• 8:30 US CPI. Estimate 0.2%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 270K

*All release times are DST

AUD/USD for Wednesday, April 13, 2016

AUD/USD April 13 at 7:25 DST

Open: 0.7684 Low: 0.7644 High: 0.7716 Close: 0.7665

AUD/USD Technical

• AUD/USD was uneventful in the Asian session and has posted slight losses in European trade
• 0.7678 was tested earlier in resistance. This line could break in the North American session
• 0.7560 is providing strong support
• Current range: 0.7560 to 0.7678

Further levels in both directions:

• Below: 0.7560, 0.7472, 0.7385 and 0.7213
• Above: 0.7678, 0.7796 and 0.7913

OANDA’s Open Positions Ratio

The AUD/USD ratio has showed strong gains towards short positions, consistent with the sharp gains by AUD/USD on Tuesday, which led to the covering of long positions. Short positions have a majority of positions (43%), indicative of trader bias towards the pair 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.