AUD/USD – Aussie Dips, Markets Eye US Consumer Price Index

The Australian dollar has posted slight losses on Friday, as AUD/USD trades at the 0.71 line in the European session. In economic news, there are no Australian releases on the schedule. In the US, the markets are eyeing key inflation reports from the US, with the release of CPI and Core CPI. Traders should be prepared for possible volatility in the currency markets following these releases.

Australian employment numbers disappointed with soft numbers earlier this week. Employment Change dropped 7.9 thousand, marking a second straight decline. This weak figure surprised the markets, which had forecast a gain of 12.9 thousand. The unemployment rate followed suit, climbing to an even 6.0%. This figure was considerably higher than the estimate of 5.8%. Earlier in the week, the RBA released the minutes of its previous meeting. The minutes reiterated the central bank’s view that the Australian economy has shown modest improvement, but concerns remain over the softer Chinese economy, which is Australia’s largest trading partner. The RBA continues to maintain an easing bias and has repeatedly said that it is prepared to cut  interest rates from the current level of 2.00% if necessary.

The Federal Reserve was on center stage earlier this week, as the Fed released the minutes of its January policy meeting. The statement after the meeting was cautious in tone, and the minutes reiterated the central bank’s concern that turmoil in global markets could have negative repercussions for the US economy. Policymakers sent out a broad hint that a rate hike is unlikely in March, as they discussed “altering their earlier views of the appropriate path for the target range for the federal funds rate”. This could have a negative impact on the US dollar, as investors may look elsewhere to park funds if US rates are not moving higher anytime soon. Federal Reserve chair Janet Yellen said last week that the Fed still planned to raise rates later in 2016, but FOMC member James Bullard argued that there was room to delay any rate moves, given global financial turmoil and weak US inflation. Still, a growing number of market players are skeptical that the Fed will make any moves before next year. Back in the heady days of December, the Fed hinted at a series of rate hikes during 2016, but the turmoil in the financial markets and the downturn in the US economy in 2016 has quickly dampened expectations of a rate move.

AUD/USD Fundamentals

Friday (Feb. 19)

• 8:00 US FOMC Loretta Mester Speaks
• 8:30 US CPI. Estimate -0.1%
• 8:30 US Core CPI. Estimate +0.2%

*Key releases are highlighted in bold

*All release times are EST

AUD/USD for Friday, February 19, 2016

AUD/USD February 19 at 7:25 EST

AUD/USD  Open: 0.7149 Low: 0.7092  High: 0.7150 Close: 0.7110

AUD/USD Technical

• AUD/USD posted losses early in the Asian session and has been marked by choppy trading in European trade.
• 0.7100 was tested earlier in support and is a weak line.
• 0.7213 has strengthened in resistance as the Aussie trades at lower levels.
• Current range: 0.7100 to 0.7213

Further levels in both directions:

• Below: 0.7100, 0.7012, 0.6931 and 0.6848
• Above: 0.7213, 0.7385 and 0.7440

OANDA’s Open Positions Ratio

AUD/USD ratio is showing little movement, consistent with the lack of movement from AUD/USD. The ratio has a slight majority of long positions (53%). This indicates trader bias towards the Aussie reversing direction and moving higher.

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.