AUD/USD – Aussie Subdued Ahead of Australian Cap Ex and Retail Sales

AUD/USD has ticked lower on Wednesday, as the pair trades slightly above the 0.75 level in the North American session. On the release front, US numbers were strong. The ADP Nonfarm Employment Change came in at 177 thousand, within expectations. Pending Home Sales jumped 1.3%, well above expectations. We could see some movement from the pair later in the day, as Australia releases two key events – Private Capital Expenditures and Retail Sales. On Thursday, the US releases unemployment claims and the ISM Manufacturing PMI.

US numbers continues to enjoy a solid 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.

Australian construction numbers have been a mixed bag. Building Approvals were red-hot in July, surging 11.3 percent. This crushed the forecast of 1.2 percent and marked the strongest gain since December 2013. However, the Australian dollar has failed to gain ground on the greenback on Tuesday. The strong release was welcome news from the construction sector, which had posted some weak numbers recently. On Sunday, HIA Home Sales plunged 9.7% in July, more than offsetting a gain of 8.2% a month earlier. Last week, Construction Work Done came in at -3.7% in the second quarter, compared to an estimate of -1.9%. The indicator has managed just one gain in the past nine quarters, pointing to ongoing weakness in the construction industry. The RBA will be in the spotlight next week, as the bank holds its monthly policy meeting on September 7. The markets are expecting the benchmark interest rate to remain unchanged at 1.50%.

A rate hike in September is back on the table, following an upbeat speech from Fed chair Janet Yellen on Friday at the Jackson Hole summit. 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. On Friday, Fed members Dennis Lockhart and Stanley Fischer both came out in favor of two rate hikes in 2016, and these comments helped the dollar record broad gains on Friday. The Fed’s stance 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

Tuesday (August 30)

• 21:30 Australian Private Sector Credit. Estimate 0.4%. Actual 0.4%

Wednesday (August 31)

• 8:15 US ADP Non-Farm Employment Change. Estimate 173K. Actual 177K
• 10:00 US Pending Home Sales. Estimate 0.7%. Actual 1.3%
• 10:30 US Crude Oil Inventories. Estimate 1.1M. Actual 2.3M
• 19:30 Australian AIG Manufacturing Index
• 21:30 Australian Private Capital Expenditure. Estimate -4.0%
• 21:30 Australian Retail Sales. Estimate 0.3%

Thursday (September 1)

• 8:30 US Unemployment Claims. Estimate 265K
• 10:00 US ISM Manufacturing PMI. Estimate 52.0

*All release times are EDT

* Key events are in bold

AUD/USD for Wednesday, August 31, 2016

AUD/USD August 31 at 13:30 EDT

Open: 0.7575 High: 0.7580 Low: 0.7542 Close: 0.7553

AUD/USD Technical

• AUD/USD has shown limited movement throughout the Wednesday session
• 0.7440 is a strong resistance line
• 0.7560 remains fluid. It was tested earlier in resistance and could see further action during on Wednesday
• 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 has shown some movement towards long positions. Currently, long positions have a majority (56%), indicative of trader bias towards AUD/USD reversing breaking out 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.