AUD/USD – Aussie Higher as Trade Balance, Retail Sales Beat Estimate

The Australian dollar has posted slight gains on Thursday, as AUD/USD trades at the 0.75 line in the European session. In Australia, Trade Balance and Retail Sales both beat their estimates. In the US, Unemployment Claims jumped to 274 thousand, higher than expected. On Friday, the US releases three key employment indicators – Average Hourly Earnings, the Unemployment Rate and Nonfarm Payrolls. In Australia, the RBA will release its quarterly monetary policy statement.

There was positive news out of Australia on Wednesday. Retail Sales climbed 0.4% in March, above the estimate of 0.3%. This was the indicator’s best showing in four months. Australia’s trade deficit narrowed to A$2.16 billion in March, compared to A$3.41 billion a month earlier. The reading easily beat the estimate of A$2.95 billion. Earlier this week, the Aussie posted sharp losses, following the RBA’s surprise rate cut by the RBA from 2.00% to 1.75%. Although the central bank has consistently sent out the message that it would not hesitate to lower rates if warranted by economic conditions, it was clearly reluctant to act and held rates at 2.00% for 10 months before this week’s dramatic move. What was the catalyst for the RBA’s change of heart? Until last week, the markets were expecting the RBA to remain on the sidelines, but a decline of -0.2% in first quarter CPI proved to be a game-changer and prodded the RBA into action. Negative inflation numbers, part of the economic landscape of the US, Japanese and Eurozone economies, have reached Australia as well, as RBA Governor Glenn Stevens stated that the RBA was forced to react to soft inflation numbers. As well, the central bank has often expressed its concern about the high value of the Australian dollar, which has hurt the critical export market. A rate cut presented the RBA with the added benefit of weakening the Australian currency. With an Australian election expected in July, the RBA may hold off from any further action until after the political picture becomes clear.

Is the rosy US labor market showing signs of backtracking? Unemployment Claims jumped to 274 thousand, marking the third straight week that the indicator has risen. This reading was higher than the forecast of 261 thousand, and marked a five-week high. This release comes on the heels of ADP Nonfarm Payrolls, which dropped sharply in April to 156 thousand. This was the weakest reading in over two years, and surprised the markets, which have grown accustomed to releases above the 200-thousand level. We’ll get a look at the all-important Nonfarm Payrolls on Friday. If the NFP report misses expectations, the US dollar could respond with losses. The employment picture has been a bright spot in the US economy, but consumer confidence and spending have not kept pace. Last week, UoM Consumer Sentiment dipped to 89.0 points short of the estimate of 90.3 points. This also marked the fourth straight drop for the key indicator. Consumer spending is a key engine of economic activity, and softer numbers in the first quarter were an important reason that US GDP weakened in the first quarter, with a lukewarm reading of 0.5%.

AUD/USD Fundamentals

Wednesday (May 4)

• 21:30 Australian Retail Sales. Estimate 0.3%. Actual 0.4%
• 21:30 Australian Trade Balance. Estimate -2.95B. Actual -2.16B

Upcoming Key Events

Thursday (May 5)

• 7:30 US Challenger Job Cuts. Actual 5.8%
• 8:30 US Unemployment Claims. Estimate 261K. Actual 274K
• 10:30 US  Natural Gas Storage. Estimate 69B
• 11:30 US FOMC Member James Bullard Speaks
• 19:15 US FOMC Member James Bullard Speaks

Upcoming Key Events

Friday (May 6)

• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 203K
• 8:30 US Unemployment Rate. Estimate 5.0%
• 21:30 RBA Monetary Policy Statement

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Thursday, May 5, 2016

AUD/USD May 5 at 9:10 EDT

Open: 0.7465 Low: 0.7457 High: 0.7513  Close: 0.7498

AUD/USD Technical

• AUD/USD has posted small gains in the Asian and European sessions
• 0.7472 was tested earlier in support. It could break in the North American session
• There is resistance at 0.7560
• Current range: 0.7472 to 0.7560

Further levels in both directions:

• Below: 0.7472, 0.7339 and 0.7251
• Above: 0.7560, 0.7678, 0.7796 and 0.7913

OANDA’s Open Positions Ratio

AUD/USD ratio is showing little movement on Thursday, consistent with the lack of movement from AUD/USD. Long and short positions remain close to an even split, indicative of a lack of trader bias as to what direction AUD/USD will take next.

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.