AUD/USD – Aussie Lower on Mixed Australian Numbers

The Australian dollar has lost ground on Thursday, as the pair trades at the 0.72 line early in the North American session. On the release front, Australian Retail Sales, posted a gain of 0.2%, short of the forecast of 0.3%. Australian Trade Balance narrowed to A$1.58 billion, much better than expectations. Later in the day, Australia releases AIG Services Index. In the US, ADP Nonfarm Payrolls came in at 173 thousand, very close to the forecast. Unemployment Claims were almost unchanged at 267 thousand, within expectations. On Friday, we’ll get a look at additional US employment data, highlighted by Nonfarm Employment Change.

Australian indicators were a mixed bag on Wednesday. Retail Sales dipped to 0.2% in April, compared to 0.4% a month earlier. There was better news from Trade Balance, as the trade deficit dropped to A$1.58 billion, its lowest level since April 2015. The Australian GDP in the first quarter was unexpectedly strong at 1.1%, well above the estimate of 0.6%. GDP was boosted by a strong increase in exports to China and higher consumer spending. This marked the strongest GDP report since 2014, and could dampen expectations about another rate cut from the RBA, which will hold its policy meeting next week. The central bank surprised the markets with a rate cut in May, lowering rates from 2.00% to 1.75%. The central bank has sent broad hints that it will continue cutting rates, although it may choose to wait until after the Australian election in July.

OPEC members will gather in Vienna on Thursday, but analysts are not expecting OPEC members to reach an agreement on a production cap or new targets, given the deep animosity between Saudi Arabia and Iran. Iran has refused to agree on an output policy in recent years, preventing members from reaching an agreement to lower or freeze production in order to boost low oil prices. Iran reiterated its policy on Wednesday, saying it would not sign off on any commitment regarding output levels. The current situation has allowed OPEC countries to pump at will, as members have adopted a mantra of “every man for himself”, jockeying for a larger piece of the oil market pie. Later on Thursday, the US releases Crude Oil Inventories, and an unexpected reading could result in volatility in the oil market.

Only a few weeks ago, a rate hike in the US was considered very unlikely. However, recent comments by Federal Reserve chair Janet Yellen and other Fed policymakers have strongly hinted that a rate hike is on the table this summer. Last week, Yellen said that if the US economy continued to improve, a rate hike would be appropriate in the “coming months”. This was followed by St. Louis Reserve President James Bullard, who said on Monday that global markets were “well prepared” for a summer interest rate rise, although he didn’t provide any specific dates. According to CME Group, traders have priced in a June rate hike at 28%, 60% for July and 68% in September. Still, the Fed will be hard-pressed to raise rates if key indicators don’t show improvement, particularly inflation numbers. Market sentiment has strongly shifted towards the Fed raising rates, and this could boost the US dollar against its rivals.

AUD/USD Fundamentals

Wednesday (June 1)

• 21:30 Australian Retail Sales. Estimate 0.3%. Actual 0.2%
• 21:30 Australian Trade Balance. Estimate -2.11B. Actual -1.58B

Thursday (June 2)

• All Day – OPEC Meetings
• 7:30 US Challenger Job Cuts. Estimate -26.5%
• 8:15 US ADP Nonfarm Employment Change. Estimate 174K. Actual 173K
• 8:30 US Unemployment Claims. Estimate 270K. Actual 267K
• 8:35 US FOMC Member Jerome Powell Speaks
• 10:30 US Natural Gas Storage. Estimate 83B
• 11:00 US Crude Oil Inventories. Estimate -2.7M
• 19:30 Australian AIG Services Index

Upcoming Key Events

Friday (June 3)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 159K
• 8:30 US Unemployment Rate. Estimate 4.9%
• 10:00 US ISM Non-Manufacturing PMI. Estimate 55.4

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Thursday, June 2, 2016

AUD/USD June 2 at 9:20 EDT

Open: 0.7248 Low: 0.7206 High: 0.7269 Close: 0.7206

AUD/USD Technical

• AUD/USD posted gains in the Asian session and has been choppy in European trade
• 0.7251 has switched to a resistance role
• 0.7160 is providing support
• Current range: 0.7160 to 0.7259

Further levels in both directions:

• Below: 0.7160, 0.7049 and 0.6916
• Above: 0.7259, 0.7339, 0.7472 and 0.7612

OANDA’s Open Positions Ratio

AUD/USD ratio is showing movement towards short positions on Thursday. Long positions have a strong majority (65%), indicative of trader bias towards AUD/USD reversing directions 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.