AUD/USD – Little Movement as RBA Hints at Rate Cut

AUD/USD is showing little change on Tuesday, as the pair trades slightly above the 0.82 line early in the North American session. On the release front, the RBA minutes hinted at a possible rate cut. Later in the day, Australia will release the MI Leading Index. In the US, Housing Starts and Building Permits missed their estimates.

The RBA released the minutes of its last policy meeting and policymakers took note of expectations in the market of a rate cut. The markets took this as a hint of a possible cut sometime in 2015, which puts the RBA on a divergent monetary stance to that of the Federal Reserve and the BOE, both of which are expected to raise rates next year. The minutes also noted that the central bank still considers the Aussie overvalued, especially with the recent declines in key commodity prices. Although the Aussie has dropped 12% since early September, the RBA reiterated that the currency needed to drop further in order to achieve “balanced growth”. Last week, RBA Governor Glenn Stevens said that he would like to see the Australian dollar at 75 US cents.

The week did not start out well in Australia, as New Motor Vehicles Sales dropped by 0.6%, its fifth decline in six readings. The indicator is an important gauge of consumer spending, as new cars and trucks are big-ticket items which consumers will forego if the economy is not doing well. As well, the government released its mid-year economic and fiscal outlook, which is a report card on how well the economy is doing compared to what was the forecast in the budget release back in May. The news was not encouraging, as the government noted that the budget deficit will come in at A$40.4 billion, up from the May estimate of A$29.8 billion. Also, the unemployment rate is forecast to hit 6.5% by mid-2015, up from 6.25% in the budget release.

In the US, Tuesday’s data was a disappointment. Building Permits dropped to 1.04 million, short of the estimate of 1.06 million. Housing Starts rose slightly to 1.04 million, shy of the estimate of 1.06 million. The Manufacturing PMI dipped to 53.7 points, well off the forecast of 56.1 points. This was the indicator’s worst showing since January.

AUD/USD for Tuesday, December 16, 2014

AUD/USD December 16 at 15:05 GMT

AUD/USD 0.8222 H: 0.8275 L: 0.8200

AUD/USD Technical

• AUD/USD was steady in the Asian session. The pair climbed as high as 0.8275 in European trade, but was unable to consolidate at these levels. AUD/USD has edged lower in the North American session.
• 0.8214 is under strong pressure and could see further activity in the North American session. 0.8150 is stronger.
• 0.8315 is a strong resistance line.
• Current range: 0.8214 to 0.8315.

Further levels in both directions:

• Below: 0.8214, 0.8150, 0.8081 and 0.7904
• Above: 0.8315, 0.8456, 0.8550, 0.8668 and 0.8763

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged on Tuesday, continuing the movement seen a day earlier. This is consistent with the pair, which is almost unchanged on the day. The ratio has a majority of long positions, indicative of trader bias towards AUD/USD moving higher.

AUD/USD Fundamentals

• 00:15 RBA Assistant Governor Guy Debelle Speaks.
• 00:30 RBA Monetary Policy Meeting Minutes.
• 13:30 US Building Permits. Estimate 1.06M. Actual 1.04M
• 14:15 US Housing Starts. Estimate 1.04M. Actual 1.03M.
• 14:45 US Flash Manufacturing PMI. Estimate 56.1 points. Actual 53.7 points.
• 23:30 Australian MI Leading Index.

*Key releases are highlighted in bold

*All release times are GMT

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.