AUD/USD – Aussie in Holding Pattern Ahead of Key US Retail Sales and PPI

The Australian dollar is unchanged on Friday, as AUD/USD continues to hug the 0.77 line.  On the release front, the US will release a host of key indicators, including PPI, Retail Sales and UoM Consumer Sentiment. There are no Australian releases on the schedule. Traders should be prepared for possible volatility from AUD/USD after these releases.

The Aussie has posted considerable gains this week, buoyed by strong readings from business confidence and consumer confidence indicators. Westpac Consumer Sentiment rebounded after two straight declines, posting a gain of 2.0% in August. Earlier in the week, NAB Business Confidence posted a gain of plus-4 in July. Although not as strong as the plus-6 reading in June, this reading indicates that business sentiment remains high. These indicators are closely monitored, since strong confidence levels often translates into spending by consumers and the private sector, both of which are crucial for economic growth. The RBA cut rates by a quarter point last week, lowering rates to a record low of 1.50%. The move was fully priced in by the markets, and the Aussie continued to gain ground after the announcement. With inflation expected to remain well below the bank’s target of 2.0%, the bank has not ruled out further rate cuts, and some analysts are predicting that rates could fall to as low as 1.0% by mid-2017. On Monday, the RBA will release the minutes of last week’s policy meeting. Any hints about further rate cuts could send the Aussie downwards.

The US will release a host of key indicators to wrap up the week. Retail sales and PPI numbers in June were respectable, but the markets are expecting softer numbers in the July reports. UoM Consumer Sentiment is expected to rebound and move back above the 90-level, with an estimate of 91.5 points. Federal Reserve policymakers will be keeping a close eye on Friday’s numbers, as the Fed must decide in September whether to raise interest rates. A soft GDP report last month had dampened expectations about a rate hike before 2017, but sharp employment numbers, led by a stellar NFP report have raised the odds of a September hike. The Fed has made no secret that its next rate decision will be data-dependent, so if Friday’s numbers beat the estimates, speculation will increase regarding a September hike. Conversely, weak numbers will likely mean that the Fed will wait until December before revisiting the rate question.

AUD/USD Fundamentals

Friday (August 12)

• 8:30 US Core Retail Sales. Estimate 0.2%
• 8:30 US PPI. Estimate 0.1%
• 8:30 US Retail Sales. Estimate 0.4%
• 8:30 US Core PPI. Estimate 0.2%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 91.5
• 10:00 US Business Inventories. Estimate 0.1%
• 10:00 US Preliminary UoM Inflation Expectations

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Friday, August 12, 2016

AUD/USD August 12 at 8:10 EDT

Open: 0.7691 High: 0.7698 Low: 0.7670 Close: 0.7691

AUD/USD Technical

• AUD/USD posted slight losses in the Asian session but has recovered in European trade
• 0.7701 is fluid and currently a weak resistance line. It could break in the Friday session
• 0.7560 is a strong support level
• Current range: 0.7560 to 0.7701

Further levels in both directions:

• Below: 0.7560, 0.7440 and 0.7339
• Above: 0.7701, 0.7835, 0.7938 and 0.8045

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged on Friday, consistent with the lack of movement from AUD/USD. Short positions have a majority (57%), indicative of trader bias towards the pair breaking out and moving ground.

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.