AUD/USD – Aussie Steady, Consumer Sentiment Shines

The Australian dollar is showing limited movement on Wednesday, after posting gains in the Tuesday session. AUD/USD is trading at 0.7340 in the European session. In Australia, Westpac Consumer Sentiment jumped 8.9%. Home Loans declined 0.9%, but this beat the estimate of -1.4%. There are three US events on the schedule, highlighted by Crude Oil Inventories. The markets are expecting a small surplus of 0.7M.

There was positive news out of Australia on Tuesday, although the Aussie failed to take advantage and didn’t gain any ground. Consumer Sentiment surged in May with a gain of 8.5%. The indicator had been struggling, posting three releases in four months. Stronger consumer confidence often translates into increased consumer spending, a critical driver of economic growth. The RBA will release the minutes of its most recent policy meeting on Monday and the markets will be looking for clues as to the timing of another rate cut. The central bank surprised with a rate cut last week, lowering rates from 2.00% to 1.75%. With a national election scheduled for July 2, the RBA is unlikely to make any monetary moves until August.

It’s been one step backward, one forward for US employment indicators. JOLT Job Openings looked sharp in April, jumping to 5.76 million. This figure was much stronger than the estimate of 5.56 million. However, last week’s host of employment numbers were a mix, which predictably has raised concerns about the strength of the US labor market. Last week, Nonfarm Payrolls looked awful, 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. Other employment indicators disappointed, as ADP Nonfarm Payrolls and Unemployment Claims both missed their estimates. ADP Nonfarm Payrolls and Unemployment Claims both missed their estimates. In other 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%.

With the Federal Reserve staying on the sidelines in April, the markets are keeping an eye on the Fed minutes, which will be release next week. In its April policy statement, the Fed stayed on the sidelines, 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 rate hike, but last week’s soft payrolls report has put a damper on speculation about an imminent hike. Last week, 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. Upcoming data, 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)

• 20:30 Australian Westpac Consumer Sentiment. Actual 8.5%
• 21:30 Australian Home Loans. Estimate -1.4%. Actual -0.9%

Wednesday (May 11)

• 10:30 US Crude Oil Inventories. Estimate 0.7M
• 13:01 US 10-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate 116.2B
• 19:00 RBA Assistant Governor Malcolm Edey Speaks
• 21:00 Australian Inflation Expectations

Upcoming Key Events

Thursday (May 12)

• 8:30 US Unemployment Claims. Estimate 277K

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Wednesday, May 11, 2016

AUD/USD May 11 at 9:00 EDT

Open: 0.7371 Low: 0.7336 High: 0.7390 Close: 0.7378

AUD/USD Technical

• AUD/USD has been choppy in the Asian and European sessions
• 0.7472 is a strong resistance line
• 0.7339 is providing weak support
• 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 Wednesday. Long positions have a majority (53%), indicative of trader bias towards AUD/USD resuming its upward movement.

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.