AUD/USD – Aussie Reverses Losses, Consumer Sentiment Next

The Australian dollar has posted gains on Tuesday, after losing ground in the Monday session. AUD/USD is trading at 0.7340 in the European session. On the release front, we’ll get another look at US employment numbers, with the release of JOLT Jobs Openings. The markets are expecting a reading of 5.55 million. Later in the day, Australia releases Westpac Consumer Sentiment. The markets are hoping for better news after two straight declines.

The Australian dollar has started May on a dismal note, dropping 270 points. The RBA had a major hand in the currency’s woes, first with an interest rate cut, followed by a dovish quarterly policy statement. The RBA surprised the markets last week with a surprise quarter point cut, lowering rates from 2.00% to 1.75%. In the RBA policy statement released on Friday, the central bank lowered its inflation forecast. The RBA’s revised forecast projects inflation between 1 and 2 percent in 2016, and between 1.5 percent to 2.5 percent through mid-2018. In its February statement, the RBA had predicted inflation running between 2 percent and 3 percent, which is the central bank’s official inflation target. This points to serious concern on the part of the RBA regarding the inflation picture. The RBA has also expressed its concern about the high value of the Australian dollar, so it certainly doesn’t mind the Aussie’s recent tumble. What’s next for the RBA? Many analysts are saying that the RBA isn’t done and another quarter point cut is imminent. However, with a national election scheduled for July, the RBA is expected to hold off from any further monetary moves until August.

Is the US labor market in trouble? Employment numbers have impressed for most of 2016, but last week’s numbers were soft. Nonfarm Payrolls looked awful in April, as the key indicator slid to just 160 thousand, well short of the forecast of 203 thousand. This marked the lowest reading in seven months. Earlier in the week, the ADP Nonfarm Payrolls and Unemployment Claims softened and fell short of their estimates. In other job releases on Friday, wage levels showed no change, as Average Hourly Earnings posted a weak gain of 0.3%. The unemployment rate remained steady at 5.0%. We’ll get another look at US job numbers later on Tuesday, with JOLTS Job Openings expected to climb to 5.55 million.

With the Federal Reserve standing on the sidelines so far in 2016, the markets are looking for hints as to when the Fed might make a move. In its April policy statement, the Fed didn’t raise rates, but the message to the markets with regard to the US economy was one of cautious optimism. The statement noted continuing improvement in the labor market but added that it was keeping a watchful eye on low inflation levels. The Fed statement appeared to leave the open to a June hike, but last week’s soft payrolls report has greatly reduced the likelihood of a June move. On Friday, New York Fed president William Dudley said he remains confident that the Fed could raise rates as much as twice this year, but many analysts are skeptical if the Fed will raise rates before 2017. Economic releases, especially employment and inflation indicators, will be major factors as the Fed must decide whether to press the rate trigger in June.

AUD/USD Fundamentals

Tuesday (May 10)

• 3:15 US FOMC Member William Dudley Speaks
• 6:00 US NFIB Small Business Index. Estimate 93.2. Actual 93.6
• 10:00 US JOLTS Openings. Estimate 5.55M
• 10:00 US Wholesale Inventories. Estimate 0.2%
• 20:30 Australian Westpac Consumer Sentiment
• 21:30 Australian Home Loans. Estimate -1.4%

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Tuesday, May 10, 2016

AUD/USD May 10 at 6:30 EDT

Open: 0.7314 Low: 0.7299 High: 0.7373 Close: 0.7345

AUD/USD Technical

• AUD/USD was flat in the Asian session. The pair has posted small gains in European trade
• 0.7472 is a strong resistance line
• 0.7339 remains fluid and has switched to a support role. It could see further action in the Tuesday session
• Current range: 0.7339 to 0.7472

Further levels in both directions:

• Below: 0.7339, 0.7251, 0.7160 and 0.7049
• Above: 0.7472, 0.7560 and 0.7678

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged on Tuesday. Long positions have a majority (55%), indicative of trader bias towards AUD/USD continuing to move higher.

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.