AUD/USD – Aussie Dips on Weak Housing Report

AUD/USD has recorded considerable losses on Friday, continuing the downward movement we’ve seen since the Wednesday session. Currently, the pair is trading just above the 0.76 line. On the release front, Australian Home Loans posted a sharp decline of 4.2%, much worse than the estimate of a 1.3% decline. In the US, the sole release on the schedule is Wholesale Inventories, which is expected to post a small gain of 0.1%. With a Fed rate hike again on the agenda, the markets will be listening closely to FOMC member Eric Rosengren, who will speak at an event in Boston.

There were no surprises from Australian GDP in the second quarter, as the economy expanded by 0.5%. This figure was close to the estimate of 0.6%. Still, the Q2 reading was soft in comparison to the first quarter release of 1.1%. Earlier this week, the RBA maintained rates at 1.50%, as widely expected. The bank has not hesitated to pull the rate trigger, lowering rates twice in 2016. In the RBA rate statement, Governor Glenn Stevens said that the bank expects low inflation levels to continue. Stevens also took note of the appreciating Australian dollar, which he said could “complicate” the economic recovery. The RBA has made no secret that it prefers a lower exchange rate, and a strong Aussie coupled with low inflation could be a recipe for another rate cut before the end of 2016.

It was just a few weeks ago that Fed chair Janet Yellen said that the case in favor of a rate hike had improved, given stronger US data. Ever since that speech in Jackson Hole, the markets have been fixated on the possibility of a rate hike prior to the end of 2016. However, a spate of weak US numbers in the past week has lowered the likelihood of a move by the Fed. The CME FedWatch Tool is showing slim odds for a September move (18%), while a move in December is more likely (40%). Although the US labor market remains close to capacity, many FOMC members will be reluctant to approve a rate hike based solely on strong employment numbers. Consumer spending remains a concern, but the main sticking point is weak inflation levels, which will likely weaken even further if the Fed raises rates. Barring any spectacular data in the next few weeks, it appears a safe bet that the Fed will hug the sidelines in September and revisit the rate issue in December.

AUD/USD Fundamentals

Thursday (September 8)

• 21:30 Australian Home Loans. Estimate -1.3%. Actual -4.2%

Friday (September 9)

• 7:45 US FOMC Eric Rosengren Speaks
• 10:00 US Wholesale Inventories. Estimate 0.1%

*All release times are EDT

* Key events are in bold

AUD/USD for Friday, September 9, 2016

AUD/USD September 9 at 9:25 EDT

Open: 0.7649 High: 0.7657 Low: 0.7605 Close: 0.7615

AUD/USD Technical

• AUD/USD was flat in the Asian session and has posted considerable losses in European trade
• 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 has shown slight movement towards long positions. Currently, short positions have a small majority (52%), indicative of trader bias towards AUD/USD continuing to move downwards.

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.