AUD/USD – Aussie Edges Lower as Australian Business Confidence Softens

The Australian dollar has posted small losses on Tuesday, continuing the lack of activity which marked the Monday session. The pair is trading at 0.7360 in the North American session. On the release front, Australian NAB Business Confidence dipped to 3 points. Later in the day, Australia releases Westpac Consumer Sentiment. In the US, Core Retail Sales matched the forecast with a gain of 0.4%, while Retail Sales edged above the forecast, climbing 0.5%. On Wednesday, the Federal Reserve will release its rate statement, with the markets expecting no change to interest rate levels.

Business confidence dipped to a 3-month low in May, according to the NAB Business Confidence survey. The indicator dipped to 3 points, compared to 5 points in the previous month. NAB chief economist Alan Oster noted that business confidence had not improved as much as expected since the RBA rate cut in May, adding that the RBA was unlikely to lower rates before August. Australians go to the polls in three week’s time, so traders should be prepared for volatility from the Australian as we head closer to the election. With Australia’s economy certain to be a hot issue during the campaign, a business think tank is warning that the country’s AAA credit rating could be at risk if the next government fails to reign in budget deficits. The Committee for Economic Development of Australia has called for a bipartisan approach to repair the economy and restore a budget surplus. A lower credit rating would make Australia less attractive for business and investment and would likely send the Australian dollar sharply lower.

All eyes are on the Federal Reserve’s policy meeting, which will conclude with a rate statement on Wednesday. The markets have written off a rate hike in June, while a July move remains unlikely, according to the CME Group. The chances of a June hike are just 1.9% compared to a 26.3% in May. The chances of a July hike is 17.9%, compared to 43.2% in May. The sharp drop in market sentiment for a rate hike can be attributed to the dismal US Nonfarm Payrolls report as well as some backpedaling by Fed over the past few weeks. Back in April, Fed chair Janet Yellen had renewed hopes of rate hike in the summer, when she said that she expected a rate hike in “the coming months”. Since then, Yellen has sounded more cautious, and in a recent speech she was careful to avoid a time frame regarding a rate hike. To be fair, the Fed has made a strong effort to communicate clearly with the markets, and has stated that the timing of a rate hike would be data-dependent. With the US economy posting some mixed numbers and inflation levels remaining at low levels, it should not come as a surprise that the Fed may stay on the sidelines until September or even later. Although it’s extremely unlikely that the Fed will make a move in June, the markets will be carefully monitoring the rate statement, looking for some clues regarding a July rate hike.

AUD/USD Fundamentals

Monday (June 13)

• 21:30 Australian NAB Business Confidence. Actual 3 points

Tuesday (June 14)

• 5:55 US NFIB Small Business Index. Estimate 93.8. Actual 93.8
• 8:30 US Core Retail Sales. Estimate 0.4%. Actual 0.4%
• 8:30 US Retail Sales. Estimate 0.4%. Actual 0.5%
• 8:30 US Import Prices. Estimate 0.8%. Actual 1.4%
• 10:00 US Business Inventories. Estimate 0.2%
• 20:30 Australian Westpac Consumer Sentiment

Upcoming Key Events

Wednesday (June 15)

• 8:30 US PPI. Estimate 0.3%
• 14:00 US FOMC Economic Projections
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <0.50%
• 14:30 US FOMC Press Conference

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Tuesday, June 14, 2016

AUD/USD June 14 at 11:05 EDT

Open: 0.7375 Low: 0.7330 High: 0.7405 Close: 0.7358

AUD/USD Technical

• AUD/USD showed limited movement in the Asian session. The pair dropped in the European session before reversing directions. AUD/USD is choppy in North American trade
• 0.7339 continues to provide weak support
• 0.7472 is providing strong resistance
• Current range: 0.7339 to 0.7472

Further levels in both directions:

• Below: 0.7339, 0.7251 and 0.7160
• Above: 0.7472, 0.7612 and 0.7339

OANDA’s Open Positions Ratio

AUD/USD ratio is showing limited movement on Tuesday, consistent with the lack of movement from AUD/USD. Long positions command a majority (55%), indicative of trader bias towards AUD/USD reversing directions and moving 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.