AUD/USD – Aussie Dips as RBA Holds Rates

The Australian dollar has posted losses on Tuesday, as the pair is trading at 0.7050 early in the North American session. On the release front, the RBA held interest rates at 2.00%. Later in the day, Australia releases two key releases, Building Approvals and Trade Balance. It’s a quiet start to the week in the US, with no major releases on the schedule.

As widely expected, the RBA maintained interest rates at the round number of 2.00%. The RBA sounded optimistic about the local economy in its rate statement, noting “there were reasonable prospects for continued growth”. RBA Governor Glenn Stevens added that continuing low inflation could lead to easier monetary policy if demand increased. The RBA has adopted a wait-and-see attitude to recent market turmoil and China slowdown. The central bank has often made reference to the Australian dollar, but sufficed this time with a rather bland statement that “the exchange rate has continued its adjustment to the evolving economic outlook”. Although the RBA didn’t make a move this time around, a rate cut later in 2016 remains a strong possibility.

As widely expected, the Federal Reserve opted to stay on the sidelines at the January policy meeting. The Fed issued a cautious statement and held the benchmark rate at 0.25%. Market speculation has now shifted to the Fed’s March meeting. Will we see another rate hike at that time? The Fed probably cannot answer this question just yet, so the markets will have to show some patience. The inflation picture remains problematic, with the Fed saying that inflation levels will remain low, and may not reach the target of 2.0% until 2018. Given the Fed’s continuing concerns about a lack of inflation, it’s hard to foresee another rate hike in March absent a strong improvement in key US indicators. The manufacturing sector is another weak spot in the US economy, and this was underscored last week, as the December reports for durables were dismal. Durable Goods dropped 1.2%, while Core Durables plunged 5.1%, its weakest showing since August 2014. These poor numbers underscore ongoing weakness in the US manufacturing sector, which has not improved despite positive economic conditions. There was more disappointing news last week on the housing front, as Pending Home Sales posted a negligible gain of 0.1%, well off the estimate of 1.0%.

AUD/USD Fundamentals

Monday (Feb. 1)

• 22:30 Australian Cash Rate. Estimate 2.00%. Actual 2.00%
• 22:30 RBA Rate Statement

Tuesday (Feb. 2)

• 10:00 US IBD/TIPP Economic Optimism. Estimate 47.8 points
• All Day – US Total Vehicle Sales. Estimate 17.4M
• 13:00 US FOMC Member Esther George Speaks
• 17:30 Australian AIG Services
• 19:30 Australian Building Approvals. Estimate 4.8%
• 19:30 Australian Trade Balance. Estimate -2.45B

Upcoming Key Events

Wednesday (Feb. 3)

• 8:15 US ADP Non-Farm Employment Change. Estimate 193
• 10:00 US ISM Non-Manufacturing PMI. Estimate 55.1 points

*Key events are in bold

*All release times are EST

AUD/USD for Tuesday, February 2, 2016

AUD/USD February 2 at 9:00 EST

AUD/USD  Open: 0.7106 Low: 0.7038  High: 0.7129  Close: 0.7048

AUD/USD Technical

• The pair posted losses late in the Asian session and early in European trade
• There is resistance at 0.7100
• 0.7063 remains a weak support line, It was tested earlier in the day.
• Current range: 0.7063 to 0.7100

Further levels in both directions:

• Below: 0.7063, 0.6931, 0.6848 and 0.6754
• Above: 0.7100, 0.7213 and 0.7385

OANDA’s Open Positions Ratio

AUD/USD ratio is unchanged this week. The ratio is close to an even split between long and short positions, indicative of a lack of trader bias as to which direction the pair will take next.

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.