AUD/USD – Strong Aussie Shrugs Off Lukewarm Australian Job Data

The Australian dollar has posted slight gains on Thursday, continuing the upward movement seen in the past two sessions. AUD/USD is trading at 0.7640 in the North American session. In economic news, Australian Employment Change came in at 7.9 thousand, missing expectations. MI Inflation Expectations and New Motor Vehicle Sales both improved compared to the previous readings. Over in the US, the Producer Price Index gained 0.5 percent, beating the estimate. Unemployment Claims remained at 254 thousand, beating expectations. Friday promises to be busy, as the US releases consumer inflation, retail sales and consumer confidence reports.

The Australian employment market continues to improve. Employment Change gained 7.9 thousand, but this fell short of the forecast of 10.1 thousand. The unemployment rate edged up to 5.8%, matching the estimate. There was positive news on the consumer spending front, as New Motor Vehicle Sales recorded a strong gain of 3.1%, reversing directions after two straight declines. Still, the Australian consumer continues to remain skeptical about the economy, according to the most recent consumer confidence report. Westpac Consumer Confidence slipped 3.0% and fell to 99.1 points (a reading below the 100-level indicates pessimism). To be fair, the survey took place just after the Australian election campaign, so the political uncertainty after the vote may well have had a negative impact on the confidence level of consumers. The consumer report failed to follow the lead of NAB Business Confidence survey on Monday, which surged to a reading of plus-6. The strong NAB figure surprised many experts, as the global economy is weak and the Brexit shocker has a chilling effect on the financial markets. Strong business confidence could point to improved economic growth in the second quarter, which would be bullish for the Australian dollar. The currency has looked sharp in the month of July, gaining over 200 points.

When the Federal Reserve raised interest rates last December, it marked the first time it had done so in close to a decade. After the historic move,  there were high hopes that the Fed would continue with a series of hikes in 2016. Fast forward to July, and the Fed is yet to make a move this year, as the US economy has not matched its impressive growth rates in 2015. Last week’s Fed minutes reinforced the perception that the Fed is unlikely to tighten policy anytime soon, as the tentative Fed remains cautious about the strength of the US economy. Although some Fed members have said that rates could be raised up to two times in 2016, clearly the markets aren’t buying it. Given the current economic climate, the markets are pessimistic about any rates moves before 2017. Investors have priced in no chance of a rate increase at the next Fed meeting on July 26-27, and just an eight percent chance of a hike in 2016. Still, market sentiment can change very quickly, so if US employment and inflation numbers improve in the second half of the year, the likelihood of a rate hike this year will increase.

AUD/USD Fundamentals

Wednesday (July 13)

• 21:00 Australian MI Inflation Expectations. Actual 3.7%
• 21:30 Australian Employment Change. Estimate 10.1K. Actual 7.9K
• 21:30 Australian Unemployment Rate. Estimate 5.8%. Actual 5.8%
• 21:30 Australian New Motor Vehicle Sales. Actual 3.1%

Thursday (July 14)

• 8:30 US PPI. Estimate 0.3%. Actual 0.5%
• 8:30 US Unemployment Claims. Estimate 263K. Actual 254K
• 8:30 US Core PPI. Estimate 0.1%. Actual 0.4%
• 10:30 US Natural Gas Storage. Estimate 61B. Actual 64B

Upcoming Key Events

Friday (July 15)

• 8:30 US CPI. Estimate 0.2%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Retail Sales. Estimate 0.4%
• 8:30 US Core Retail Sales. Estimate 0.1%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 93.7 

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Thursday, July 14, 2016

AUD/USD July 14 at 11:00 EDT

Open: 0.7602 High: 0.7658 Low: 0.7577 Close: 0.7640

AUD/USD Technical

• AUD/USD has been marked by choppy trading and has posted slight gains in the Thursday session
• 0.7739 is providing resistance
• 0.7612 continues to provide support
• Current range: 0.7612 to 0.7739

Further levels in both directions:

• Below: 0.7612, 0.7472, 0.7339 and 0.7251
• Above: 0.7739, 0.7835 and 0.7938

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged on Thursday. Short positions have a small majority (47%), indicative of slight trader bias towards AUD/USD reversing directions and moving downwards.

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.