AUD/USD has posted small losses on Wednesday. Currently, the pair is trading at 0.6875, down 0.12% on the day. On the release front, Australian indicators pointed lower. The MI Leading Index dropped 0.1%, while the Construction Index declined 1.9%, much weaker than the estimate of a 0.1% gain. This was a third straight decline, indicative of persistent weakness in the construction sector. Later in the day, Australia releases manufacturing and services PMIs. In the U.S. today’s highlight is the minutes of the Federal Reserve’s policy meeting earlier this month. On Thursday, the U.S. releases unemployment claims.
Traders have circled June 4 on their calendars, the date of the RBA’s next policy meeting. The bank surprised the markets at the May meeting, when it maintained the key interest rate at 1.50%. The markets had priced in a rate cut of 25 basis points, given that economic growth has been dampened by the global trade war, in particular the slowdown which has gripped China. The RBA minutes were dovish, with a reference to the “uncertainties” regarding the bank’s inflation target of 2.0%. As well, policymakers dropped a reference to “not a strong case” for a rate move in the near future, which appears to be a bias in favor of easing. RBA Governor Lowe spoke on Tuesday and the message was even clearer. Lowe stated that a “decrease in the cash rate would likely be appropriate.” The markets responded by pricing in a rate cut in June at 91%, so the Aussie could face further headwinds as investors look for more attractive alternatives.
All eyes are on the Federal Reserve meeting. Will the minutes point to any bias regarding the next rate move? At the May meeting, the Federal Reserve maintained the benchmark rate for a fourth straight month. The rate statement noted that inflation pressures remain muted and that the FOMC would remain patient regarding future rate movements. Jerome Powell reinforced this stance after the meeting, saying that “we don’t see a strong case for moving in either direction”. The Fed is already on record as saying it does not expect to raise rates before 2020, and with inflation levels persistently below the Fed’s target of 2.0%, the Fed can afford to continue its wait-and-see stance.
Tuesday (May 21)
- 20:30 Australian MI Leading Index. Actual -0.1%
- 21:30 Australian Construction Index. Estimate 0.1%. Actual -1.9%
Wednesday (May 22)
- 1:00 US FOMC Member Bullard Speaks
- 10:00 US FOMC Member Williams Speaks
- 10:30 US Crude Oil Inventories. Estimate -1.2M
- 14:00 US FOMC Meeting Minutes
- 19:00 Australian Flash Manufacturing PMI
- 19:00 Australian Flash Services PMI
Thursday (May 23)
- 8:30 US Unemployment Claims. Estimate 215K
*All release times are DST
* Key events are in bold
AUD/USD for Wednesday, May 22, 2019
AUD/USD May 22 at 11:20 DST
Open: 0.6884 High: 0.6897 Low: 0.6871 Close: 0.6875
AUD/USD was flat for most of the Asian session. The pair edged higher in European trade but has given up these gains in North American trade
- 0.6825 is providing support
- 0.6968 is the next resistance line
- Current range: 0.6825 to 0.6968
Further levels in both directions:
- Below: 0.6825, 0.6744 and 0.6686
- Above: 0.6968, 0.7085, 0.7190 and 0.7240
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