AUD/USD – U.S jobless claims dip but Aussie holds ground

AUD/USD has edged higher on Thursday. Currently, the pair is trading at 0.6895, up 0.19% on the day. On the release front, Australian Services PMI improved to 52.3 in May, up from 50.5 points in April. Manufacturing PMI ticked up to 51.1, up from 51.o in April. This points to stagnation in the manufacturing sector. In the U.S., unemployment claims dipped to 211 thousand, just below the forecast of 212 thousand. This marked a 5-month low, as the U.S. job market remains tight. On Friday, the U.S. releases durable goods orders reports.

The Federal Reserve released the minutes of the policy meeting held earlier in May. Fed members continued to preach patience, stating that rates will likely remain unchanged for some time. The minutes indicated that although members are more optimistic about economic growth, they remain committed to maintaining current rate levels, given that inflation remains low. It should be noted that the policy meeting took place on May 1-2, one week before President Trump announced new tariffs on China, which has significantly escalated trade tensions between the U.S. and China.

The Fed minutes may have reinforced the central bank’s stance that no rate moves are planned until next year, but the markets don’t share this view, with many analysts expecting at least one rate cut in 2019. The CME Group has priced in a 36% likelihood of a 25-point basis cut at the September meeting. The possibility of lower U.S. rates makes the greenback less attractive to investors and could dampen sentiment towards the U.S. dollar.

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, released earlier in the week, 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.

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AUD/USD Fundamentals

Wednesday (May 22)

• 19:00 Australian Flash Manufacturing PMI. Actual 51.1
  
• 19:00 Australian Flash Services PMI. Actual 52.3
  

Thursday (May 23)

• 8:30 US Unemployment Claims. Estimate 215K. Actual 211K
  

Friday (May 24)

• 8:30 US Core Durable Goods Orders. Estimate 0.1%
• 8:30 US Durable Goods Orders. Estimate -2.0%

*All release times are DST

* Key events are in bold

AUD/USD for Thursday, May 23, 2019

AUD/USD May 23 at 11:55 DST

Open: 0.6881 High: 0.6897 Low: 0.6865 Close: 0.6895

AUD/USD Technical

AUD/USD posted small losses in the Asian session and showed limited movement in European trade. The pair has moved higher 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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