AUD/USD – Aussie Slide Continues, Australian Business Confidence Next

The Australian dollar has posted losses on Wednesday continuing the downward movement which we saw in the Tuesday session. In the North American session, AUD/USD is trading at 0.7460. On the release front, there are no major events on the schedule. Australian MI Leading Index declined 0.2%, marking a 4-month low. Later in the day, Australia releases NAB Quarterly Business Confidence. The indicator has been steady, posting readings of 4 points in the past three months. In the US, the sole event is Crude Oil Inventories. The indicator is expected to show another decline, with a forecast of -1.3 million. On Thursday, the US will release unemployment claims as well as manufacturing and housing numbers.

It’s been a rough week for the Australian dollar, which has slipped 1.5 percent against the greenback. The Aussie responded negatively to the RBA minutes on Tuesday. The minutes, which provided details of the bank’s policy meeting earlier this month, indicated that there was further scope to lower interest rates, given low inflation levels. However, the minutes added that a monetary move by the bank would be data-dependent. In other words, if inflation and other key indicators show improvement, there will be less pressure on the bank to cut rates in order to boost inflation and bolster economic growth. The RBA caught the markets flat-footed in May, when it lowered rates from 2.00% to 1.75% in response to a dismal CPI release in the first quarter of -0.2%. The next CPI release is due on July 27, and another weak reading could be a sign that the RBA will again lower interest rates in order to boost economic growth.

Central banks remain in the spotlight. Last week, the BoE surprised the markets and held off from lowering rates. Will the ECB make a move at its policy meeting on Thursday? The ECB is under pressure to adopt further monetary easing, but the markets are not expecting a rate cut from the current rate of 0.00%. Still, a dovish rate statement or any hints about further easing from Mario Draghi could push the euro downwards. The situation has become further complicated with the recent Brexit vote, as Britain, the second largest economy in Europe, will be soon be waving goodbye to the EU. This move (and the negotiations preceding it) are bound to have profound economic ramifications on both Britain and the EU, and could result in significant volatility in the currency markets.

AUD/USD Fundamentals

Tuesday (July 19)

  • 20:30 Australian MI Leading Index. Actual -0.2%

Wednesday (July 20)

  • 10:30 US Crude Oil Inventories. Estimate -1.3M
  • 21:30 NAB Quarterly Business Confidence

Thursday (July 21)

  • 8:30 US Philly Fed Manufacturing Index. Estimate 5.1
  • 8:30 US Unemployment Claims. Estimate 271K
  • 10:00 US Existing Home Sales. Estimate 5.48M

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Wednesday, July 20, 2016

AUD/USD July 20 at 9:20 EDT

Open: 0.7507 High: 0.7510 Low: 0.7466 Close: 0.7464

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.7105 0.7251 0.7339 0.7472 0.7612 0.7739
  • AUD/USD was flat in the Asian and European sessions. The pair has posted slight losses in North American trade
  • 0.7472 remains fluid and has switched to a resistance role
  • 0.7339 is a strong support level
  • Current range: 0.7339 to 0.7472

Further levels in both directions:

  • Below: 0.7339, 0.7251 and 0.7105
  • Above: 0.7472, 0.7612, 0.7739 and 0.7835

OANDA’s Open Positions Ratio

AUD/USD ratio has shown slight gains by long positions on Wednesday. Small and long positions are evenly splitindicative of a lack of trader bias as to what direction AUD/USD will take next.

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.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.