AUD/USD – Aussie Shrugs Off Weak Capex, Retail Sales Reports

AUD/USD has posted slight gains on Thursday, as the pair trades at 0.7550 in the North American session. On the release front, Australian Private Capital Expenditure dropped 5.3%, while Retail Sales came in at a flat 0.0%, as both indicators missed their estimates. In the US, unemployment claims came in at 263 thousand, within expectations. However, the US ISM Manufacturing PMI posted a weak reading of 49.4 points, short of the estimate. On Friday, the US releases three key employment indicators – the unemployment rate, Average Hourly Earnings and the Nonfarm Employment Change.

Australian key indicators were a disappointment on Thursday. Private Capital Expenditure fell 5.3% in the second quarter, weaker than the forecast of -4.0%. Retail Sales, the primary gauge of consumer spending, edged lower to 0.0% in July, shy of the estimate of 0.3%. This marked the indicator’s weakest reading since February. Despite the weak numbers, the Aussie has posted slight gains in the Thursday session. The markets are keeping a close eye on the RBA, which will set interest rates on September 6. The bank is not expected to change the current rate level of 1.50%, but the RBA has surprised the markets with unexpected quarter-point cuts in the past.

US numbers were a mix on Thursday, but have otherwise had a strong week. Unemployment Claims came in at 263 thousand, better than the forecast of 265 thousand. It marked the third straight week that the indicator has beat estimates. Earlier in the week, the ADP Nonfarm Employment Change was little changed in August, posting a gain of 177 thousand. This beat the forecast of 174 thousand, the third straight month the indicator has exceeded the forecast. This release precedes the all-important official Nonfarm Employment Change report on Friday. On the housing front, Pending Home Sales gained 1.3%, well above the forecast of 0.7%, marking a 3-month high. On Tuesday, CB Consumer confidence jumped to 1o1.1 points in August, above the forecast of 99.7 points. It marked the indicator’s highest level since September 2015 and points to strong confidence on the part of the US consumer. The only soft spot so far this week was from the manufacturing front, as the ISM Manufacturing PMI pointed to contraction, with an estimate of 49.4 points. This marked the first contraction from the PMI in six months.

After an upbeat speech from Fed chair Janet Yellen last week at the Jackson Hole summit, a September rate hike is back on the table. Yellen’s message to the markets was refreshingly clear, as she said that the case for a rate increase had “strengthened in recent months”. Yellen noted that the key economic indicators were performing well – the labor market was approaching maximum employment, inflation was steady, and consumer spending remained solid. Still, Yellen did not provide any timeline on a rate hike nor did she spell out what the Fed wants to see before pressing the rate trigger. The Fed’s signal to the markets has raised the odds of a rate move, according to the CME Group FedWatch tool, with a September hike priced at 30% in September and 57% for a December hike. However, given that any move by the Fed will be data-dependent, US numbers ahead of the Fed policy meeting on September 21 could significantly change the rate outlook.

AUD/USD Fundamentals

Wednesday (August 31)

• 19:30 Australian AIG Manufacturing Index. Actual 46.9
• 21:30 Australian Private Capital Expenditure. Estimate -4.0%. Actual -5.4%
• 21:30 Australian Retail Sales. Estimate 0.3%. Actual 0.0%

Thursday (September 1)

• 2:00 Australian Commodity Prices. Actual 0.8%
• 7:30 US Challenger Job Cuts. Actual -21.8%
• 8:30 US Unemployment Claims. Estimate 265K. Actual 263K
• 8:30 US Revised Nonfarm Productivity. Estimate -0.6%. Actual -0.6%
• 8:30 US Revised Unit Labor Costs. Estimate 2.0%. Actual 4.3%
• 9:45 US Final Manufacturing PMI. Estimate 52.1. Actual 52.0
• 10:00 US ISM Manufacturing PMI. Estimate 52.0. Actual 49.4
• 10:00 US Construction Spending. Estimate 0.6%. Actual 0.0%
• 10:00 US ISM Manufacturing Prices. Estimate 54.5. Actual 53.0
• 10:30 US Natural Gas Storage. Estimate 38B. Actual 51B 
• All Day – US Total Vehicle Sales. Estimate 17.2M 

Friday (September 2)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 186K
• 8:30 US Unemployment Rate. Estimate 4.8%

*All release times are EDT

* Key events are in bold

AUD/USD for Thursday, September 1, 2016

AUD/USD September 1 at 11:25 EDT

Open: 0.7518 High: 0.7554 Low: 0.7504 Close: 0.7547

AUD/USD Technical

• AUD/USD posted slight gains in the Asian session. The pair was flat in the European session and has recorded slight gains in North American trade
• 0.7440 is a strong support line
• 0.7560 remains fluid. It is currently a weak resistance line
• Current range: 0.7440 to 0.7560

Further levels in both directions:

• Below: 0.7440, 0.7339 and 0.7200
• Above: 0.7560, 0.7701, 0.7835 and 0.7938

OANDA’s Open Positions Ratio

AUD/USD ratio is unchanged on Thursday. Currently, long positions have a majority (57%), indicative of trader bias towards AUD/USD continuing to move to higher 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.