AUD/USD has posted small gains on Tuesday, continuing the upward trend we saw on Monday. In the North American session, the pair is trading slightly above the 0.76 level. On the release front, Australia’s current account deficit narrowed to A$15.5 billion in the second quarter, beating the forecast of A$20.2 billion. The RBA maintained its benchmark interest rate at 1.50%. Later in the day, Australia releases GDP for the second quarter. In the US, today’s key event is the ISM Non-Manufacturing PMI. The indicator is expected to remain steady, with an estimate of 55.4 points.
The Aussie continues to post slight gains and has pushed past the 0.76 on Tuesday. The current account deficit fell to A$15.5 billion, marking a five-month low. As widely expected, the RBA maintained rates at 1.50%. Market sentiment was positive towards the Aussie as the RBA rate statement did not mention the strong climb of AUD/USD, which has climbed 5.4% since the start of 2016. There is more to come from Australia, which will release second quarter GDP later on Tuesday. The economy is expected to grow by just 0.4% in Q2, after an excellent gain of 1.1% in the first quarter. If the GDP reading is weaker than forecast, we could see the Aussie reverse directions and head lower.
Australian business and employment indicators looked sharp on Monday. Company Operating Profits jumped 6.9% in the second quarter, its strong gain in six years. The ANZ Job Advertisement report rebounded in August with a strong gain of 1.8%, marking a 3-month high. The AIG Services Index disappointed, as the indicator dropped to 45.0, pointing to contraction for the first time since April.
The US labor market has been strong for most of 2016, but that trend hit a nasty road bump on Friday, as US job data for August was dismal. Nonfarm Payrolls plunged to 151 thousand in August, down from 255 thousand a month earlier. This was well short of the forecast of 180 thousand. Wage growth also disappointed, as Average Hourly Earnings edged lower to o.1%, shy of the forecast of 0.2%. Clearly this was not positive news, but August job data is often unreliable and tends to miss market forecasts. Will the Fed look the other way and ignore the weak job data? The markets apparently think so, as the odds of a rate hike this year are about the same after the payrolls report – the the likelihood of a September hike is 20 percent, while a December increase is pegged at 60 percent. Still, even if the August payrolls release is overlooked, many FOMC members remain uneasy about a rate hike, especially given the persistent lack of inflation in the economy. Key inflation indicators will be released in mid-September, just before the Fed policy meeting on September 21. These releases could play a critical role in determining if the Fed presses the rate trigger this month, or decides to revisit the rate question in December, which would be exactly a year from the last rate hike.
Monday (September 5)
- 21:30 Australian Current Account. Estimate -20.2B. Estimate -15.5B
Tuesday (September 6)
- 00:30 Australian Cash Rate. Estimate 1.50%. Actual 1.50%
- 00:30 Australian RBA Rate Statement
- 10:00 US ISM Non-Manufacturing PMI. Estimate 55.4
- 10:00 US IBD/TIPP Economic Optimism. Estimate 48.6
- 10:00 US Labor Market Conditions Index
- 21:30 Australian GDP. Estimate 0.4%
*All release times are EDT
* Key events are in bold
AUD/USD for Tuesday, September 6, 2016
AUD/USD September 6 at 9:45 EDT
Open: 0.7591 High: 0.7654 Low: 0.7591 Close: 0.7622
- AUD/USD posted slight gains in the Asian session. The pair has shown limited movement in the European and North American sessions
- 0.7560 is providing support
- There is resistance at 0.7701
- Current range: 0.7560 to 0.7701
Further levels in both directions:
- Below: 0.7560, 0.7440, 0.7339 and 0.7200
- Above: 0.7701, 0.7835 and 0.7938
OANDA’s Open Positions Ratio
AUD/USD ratio is unchanged on Tuesday. Currently, long positions have a majority (53%), indicative of slight trader bias towards AUD/USD continuing to move to higher ground.