The Australian dollar has posted losses on Tuesday, as the pair trades at 0.7160. On the release front, it is a quiet day. We’ll get a look at the week’s first key event, with the release of US New Home Sales. The markets are expecting the indicator to improve in the April report, with the estimate standing at 521 thousand. Later in the day, Australia will release Construction Work Done, with an estimate of -1.4%. On Wednesday, Australian Private Capital Expenditure, a key release, will be published.
The Australian dollar has resumed its downward trend, and is currently trading at 10-week lows. Much of the Aussie’s woes can be attributed to the RBA, which unexpectedly cut rates in early May. Last week, the RBA minutes hinted at another rate cut, as inflation levels remain stubbornly low. The currency lost more ground on Tuesday, as RBA Governor Glenn Stevens defended the RBA’s monetary policy, saying that there was no need to change the 2 percent to 3 percent target band for inflation. The RBA has put the markets on notice that it is considering further rate cuts, but the Australian dollar’s 500-point plunge since late April has given the central bank some breathing room. We’re unlikely to see the RBA make any moves prior to August, since the government has called an election for July 2.
The Federal Reserve’s minutes were surprisingly hawkish in tone, and this resulted in strong volatility in the currency markets last week. It has also renewed market speculation about a June rate hike. The Fed is unlikely to make a move if key indicators don’t show improvement, particularly inflation indicators. On Monday, FOMC members James Bullard and John Williams voiced support for further rate hikes. Bullard said that the Fed planned to resume rate hikes if the US economy strengthened, while Williams reiterated that he expected the Fed to raise rates two or three times in 2016. However, there appears to be a gap between what Fed members are saying and market sentiment, as many analysts are projecting only one rate hike this year. The guessing game as to what the Fed has in mind is likely to continue into June, but it’s safe to say that another rate move will be data-dependent, so stronger US numbers will increase the likelihood of a quarter-point hike at the June policy meeting.
Tuesday (May 24)
- 10:00 US New Home Sales. Estimate 521K
- 21:30 Australian Construction Work Done. Estimate -1.4%.
Upcoming Key Events
Wednesday (May 25)
- 21:30 Australian Private Capital Expenditure. Estimate -3.2%
*Key releases are highlighted in bold
*All release times are EDT
AUD/USD for Tuesday, May 24, 2016
AUD/USD May 24 at 5:25 EDT
Open: 0.7217 Low: 0.7155 High: 0.7224 Close: 0.7158
- AUD/USD has posted losses in the Asian and European sessions
- 0.7160 is fluid and currently a weak resistance line. It will likely see further action in the Tuesday session
- 0.7049 is providing support
- Current range: 0.7049 to 0.7160
Further levels in both directions:
- Below: 0.7049, 0.6916 and 0.6843
- Above: 0.7160, 0.7251, 0.7339 and 0.7472
OANDA’s Open Positions Ratio
AUD/USD ratio is showing little change on Tuesday. Long positions have a strong majority (60%), indicative of trader bias towards AUD/USD breaking out and moving higher.
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