AUD/USD – Aussie Dips on Soft Chinese CPI

The Australian dollar has lost ground on Thursday, erasing the gains from the Wednesday session. The pair is trading at 0.7440 in the North American session. On the release front, there are no Australian events on the schedule. However, the Aussie did lose ground following the Chinese CPI report. The indicator posted a gain of 2.0%, short of expectations. In the US, Unemployment Claims dipped to 264 thousand, beating expectations.  On Friday, the US will release UoM Consumer Sentiment, with the indicator expected to dip to 94.1 points.

Last week’s Nonfarm Payrolls of just 38,000 new jobs shocked the markets and sent the US dollar tumbling. A couple of minor employment indicators were soft, leading to some concern about the strength of the US labor market. However, these concerns should be laid to rest after key job numbers this week were solid and beat expectations. On Wednesday, JOLTS Job Openings improved to 5.79 million, easily beating the forecast of 5.67 million. Unemployment Claims followed suit with a strong reading. The indicator dropped to 264 thousand, compared to an estimate of 269 thousand. Significantly, this marked the lowest jobless report in six weeks. With the Federal Reserve mulling over a rate hike in the next few months, employment numbers will be especially significant, and any unexpected reading could result in volatility in the currency markets.

The Australian dollar is sensitive to key Chinese data, as the Asian giant is Australia’s number one trading partner. Chinese CPI was unexpectedly weak in the year-to-year release for May, posting a gain of 2.0%. This was shy of the estimate of 2.3%. Chinese demand appears to have picked up in the second quarter, so the markets are hopeful that this weak inflation number is reflective of the drop in Chinese demand in Q1, which had significant negative repercussions for the global economy.

The Australian dollar posted sharp gains late last week, following a dismal US Nonfarm Payrolls report. The rally has continued this week, as the Aussie gained ground following the RBA rate announcement on Tuesday. As expected, the RBA maintained the benchmark rate at 1.75%. However, the rate statement was more hawkish than expected. In the May statement, the RBA said that inflation rates were lower than forecast, and proceeded to give broad hints about lowering rates. The June statement said that that the RBA expects inflation to remain at low levels. This change in tone gave a boost to the Australian dollar, which as climbed about 260 points since the end of May. Does this mean that the central bank will not lower rates in August? Any decision to maintain or lower rates will likely depend on key data, notably inflation and employment numbers. An unexpectedly strong GDP for the first quarter has given the RBA some breathing room, and further strong numbers could delay a rate cut.

AUD/USD Fundamentals

Thursday (June 9)

• 8:30 US Unemployment Claims. Estimate 269K. Actual 264K
• 10:00 US Wholesale Inventories. Estimate 0.1%
• 10:30 US Natural Gas Storage. Estimate 80B
• 13:01 US 30-year Bond Auction

Upcoming Key Events

Friday (June 10)

• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 94.1 points

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Thursday, June 9, 2016

AUD/USD June 9 at 10:00 EDT

Open: 0.7490 Low: 0.7420 High: 0.7504 Close: 0.7440

AUD/USD Technical

• AUD/USD was flat in the Asian session and posted losses in European trade. The pair is steady in the North American session
• 0.7339 continues to provide strong support
• 0.7472 remains fluid and is currently a weak resistance line
• Current range: 0.7339 to 0.7472

Further levels in both directions:

• Below: 0.7339, 0.7251 and 0.7160
• Above: 0.7472, 0.7612 and 0.7339

OANDA’s Open Positions Ratio

AUD/USD ratio is showing gains in short positions on Thursday. Long positions command a majority (54%), indicative of trader bias towards AUD/USD continuing to move 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.