AUD/USD – Aussie Edges Higher, Australian Construction Report Next

The Australian dollar has edged higher, as the markets search for economic cues at the start of the trading week. In Monday’s North American session, the pair is trading at 0.7630. The only Australian release is the CB Leading Index, which posted a small gain of 0.1%. There are no US events on Monday. On Tuesday, Australia releases Construction Work Done, while the US will release New Home Sales, a key indicator.

There was good news from the Australian labor market last week, as employment numbers sparkled in July. Employment Change jumped 26.2 thousand, crushing the estimate of 10.2 thousand. This marked the sharpest gain since October 2015. However, the rise was made up of part-time jobs, as full-time positions actually dropped. There was also positive news from the unemployment rate, which dipped to 5.7%, down from 5.8% a month earlier. The strong job numbers will be welcome news to the RBA, which cut rates to an all-time low of 1.50% earlier this month and would like to avoid another cut at its next policy meeting in September.

Late in the week, central bank heads and other senior financial officials will meet for the annual tête-à-tête in Jackson Hole, Wyoming. The markets will be looking for hints from Federal Reserve chair Janet Yellen regarding the Fed’s monetary plans, particularly the timing a rate hike. FOMC members are expected to express their views ahead of the key meeting. Fed Vice Chairman Stanley Fischer took the opportunity and sounded upbeat about the US economy, saying that the Fed was close to its aims of a full labor market and the inflation target of 2 percent. The latter claim sounds a bit optimistic, as US inflation levels have consistently been closer to zero than the 2 percent level. It will be interesting to see if Janet Yellen follows suit and expresses satisfaction with current inflation levels.

Any market players who were hoping for some clarity from last week’s Federal Reserves minutes were likely none the wiser after combing through the minutes. The release, which provided the details of the July policy meeting, indicated that FOMC members are deeply divided on the timing of a rate hike – some want to raise levels soon, as the US labor market approaches full employment, while others expressed concern about making a move with inflation levels well below the target of 2%. Recent data is pointing in all directions, which explains why the Fed is divided over the timing of a rate hike. After a soft GDP report in late July, nonfarm payrolls was stellar. However, this was followed by weak retail sales and CPI numbers. The great rate debate needs to be resolved one way or another, as the Fed must set rates at its policy meeting next month. Policymakers will be fine-combing through upcoming economic releases, particularly employment and inflation numbers. The news remains bleak on the inflation front, as underscored by July’s consumer inflation reports. CPI posted a weak reading of 0.0%, its worst showing in five months. Core CPI dropped to 0.1%, shy of the estimate of 0.2%. As of now, a September hike is virtually off the table, while the Fed could go either way in December, with the odds of a December hike pegged at 50/50.

AUD/USD Fundamentals

Monday (August 22)

• 10:30 Australian CB Leading Index. Actual 0.1%

Tuesday (August 23)

• 10:00 US New Home Sales. Estimate 575K
• 21:30 Australian Construction Work Done. Estimate -1.9%

AUD/USD for Monday, August 22, 2016

AUD/USD August 22 at 11:30 EDT

Open: 0.7605 High: 0.7640 Low: 0.7582 Close: 0.7629

AUD/USD Technical

• AUD/USD posted slight losses in the Asian session. The pair recovered these losses in the European session and has posted slight gains in North American trade
• There is resistance at 0.7701
• 0.7560 is providing support
• 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 unchanged on Monday. Currently, short positions have a small majority (53%), indicative of slight trader bias towards the pair continuing to move upwards.

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.