AUD/USD – Aussie slips below 70 on Trump comments, markets brace for RBA rate cut

AUD/USD has started the week with losses, dropping below the symbolic 70 line for the first time since mid-December. In the North American session, the pair is trading at 0.6994, down 0.41% on the day. On the release front, MI Inflation Gauge slowed to 0.2% in April, down from 0.4% a month earlier. ANZ Job Advertisements came in at -0.1%, after a sharp decline of 1.7% in the previous release. This marked the fifth decline in the past six months. Chinese Caixin Services PMI ticked up to 54.5, above the estimate of 54.3. There are no U.S. releases on Monday. Later in the day, Australia releases retail sales and trade balance. On Tuesday, the RBA is expected to cut the benchmark rate from 1.50% to 1.25%. The U.S. will release JOLTS Job Openings.

The Aussie is under pressure, and the headwinds could continue this week, as the RBA is widely expected to lower interest rates for the first time in 32 months. The slowdown in China has taken a toll on the Australian economy, and the RBA has been in dovish mode for some time, but has held off from lowering rates. Although the cut has been priced in by the markets, traders can expect the move to send the Australian dollar downwards.

President Trump sent the equity markets sharply lower on Monday, after threatening to raise tariffs on $200 billion worth of Chinese goods as early as Friday, from 10% to 25%. Trump sounded nonchalant about the trade talks, saying that even if an agreement wasn’t reached, the U.S. would benefit from the new tariffs. China has threatened to cancel the talks, so traders should be prepared for some swings in the currency markets in the coming days.

On Friday, the focus was on U.S. employment data in April. The numbers were mixed, as nonfarm payrolls were strong, but wage growth remained soft. Average Hourly Earnings edged up to 0.2%, up from 0.1%. However, this missed the estimate of 0.3%. Nonfarm payrolls sparkled, climbing to 263 thousand, up from 196 thousand a month earlier. The reading easily beat the forecast of 181 thousand. The unemployment rate dipped to 3.6% in April, down from 3.8% a month earlier. This marked the lowest unemployment rate since 1969.

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AUD/USD Fundamentals

Sunday (May 5)

• 21:00 Australian MI Inflation Gauge. Actual 0.2%
• 21:30 Australian ANZ Job Advertisements. Actual -0.1%
• 21:45 Chinese Caixin Services PMI. Estimate 54.3. Actual 54.5

Monday (May 6)

• 10:00 US FOMC Member Williams Speaks
• 21:30 Australian Retail Sales. Estimate 0.2%
• 21:30 Australian Trade Balance. Estimate 4.49B

Tuesday (May 7)

• 00:30 RBA Cash Rate. Estimate 1.25%
• 00:30 RBA Rate Statement
• 10:00 US JOLTS Job Openings. Estimate 7.35M

*All release times are DST

* Key events are in bold

AUD/USD for Monday, May 6, 2019

Open: 0.7023 High: 0.7023 Low: 0.6963 Close: 0.6994

AUD/USD Technical

AUD/USD posted sharp losses in the Asian session. The pair recorded slight gains in European trade and is showing little movement in the North American session.

• 0.6970 is a weak support level. This line was tested earlier on Monday
• 0.7085 is the next resistance line
• Current range: 0.6970 to 0.7085

Further levels in both directions:

• Below: 0.6970, 0.6825 and 0.6744
• Above: 0.7085, 0.7190, 0.7240, and 0.7315

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