AUD/USD – Aussie edges higher despite soft trade surplus

AUD/USD has posted slight gains in the Thursday session, erasing most of the losses seen on Wednesday. In North American trade, AUD/USD is trading at 0.6985, up 0.23% on the day. In Australia, the trade surplus narrowed to A$4.87 billion in April, down from A$4.95 billion a month earlier. This missed the forecast of A$5.05 billion. Later in the day, Australia releases AIG Construction Index and Home Loans. In the U.S., unemployment claims rose to 218 thousand, above the estimate of 215 thousand. On Friday, the U.S. releases nonfarm payrolls and wage growth.

Australia’s trade surplus missed expectations, as the global trade war has taken a bite out of the country’s key export sector. The slowdown in China has translated into economic pain for Australia, as the Asian giant is Australia’s number one trading partner. Growth in Q1 was just 1.8% on an annualized basis, far lower than the long-term average of 3.5%. The RBA has finally stepped in with a rate cut, but will there be more pain before gain? The bank lowered rates from 1.50% to 1.25%, marking the first time the RBA has cut rates since August 2016. If key economic indicators continue to struggle, we could see another rate cut in the second half of the year.

Is the Federal Reserve on its way to lowering rates for the first time in 2019? Since raising rates back in December, the Federal Reserve has sounded neutral with regard to rate movement. However, the Fed made a dramatic U-turn this week, with Fed Chair Jerome Powell hinting at a rate cut. On Tuesday, Powell said that the Fed would “act as appropriate to sustain the expansion”. It was also noteworthy that Powell did not mention his “patient” approach to monetary policy, which has been a buzzword in his recent comments. Earlier in the week, St. Louis Fed president James Bullard also discussed the need to lower rates in order to stabilize the economy. Bullard said that the Fed might have to cut rates due to low inflation and the ongoing trade war with China.

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AUD/USD Fundamentals

Wednesday (June 5)

• 21:30 Australian Trade Balance. Estimate 5.05B. Actual 4.87B
  

Thursday (June 6)

• 7:30 US Challenger Cuts. Actual 85.9%
• 8:30 US Unemployment Claims. Estimate 215K. Actual 218K
  
• 8:30 US Revised Nonfarm Productivity. Estimate 3.6%. Actual 3.4%
• 8:30 US Revised Unit Labor Costs. Estimate -0.9%. Actual -1.6%
• 8:30 US Trade Balance. Estimate -50.5B. Actual -50.8B
• 10:30 US Natural Gas Storage. Estimate 110B. Actual 119B
  
• 13:00 US FOMC Member Williams Speaks

Friday (June 7)

• 8:30 US Average Hourly Earnings. Actual 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 180K
• 8:30 US Unemployment Rate. Estimate 3.6%

*All release times are DST

* Key events are in bold

AUD/USD for Thursday, June 6, 2019

AUD/USD June 6 at 11:00 DST

Open: 0.6969 High: 0.6994 Low: 0.6964 Close: 0.6983

AUD/USD Technical

AUD/USD showed little movement in the Asian session and edged higher in European trade. Early in North American trade, the pair posted small gains but has retracted

• 0.6968 is a weak support line. The pair was tested earlier in the day
• 0.7085 is the next resistance line
• Current range: 0.6968 to 0.7085

Further levels in both directions:

• Below: 0.6968, 0.6825, 0.6744 and 0.6686
• Above: 0.7085, 0.7190 and 0.7240

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.