AUD/USD – Aussie Drop Continues, US Housing Report Disappoints

The Australian dollar has posted losses on Wednesday, continuing the trend from a day earlier. AUD/USD is trading at 0.7140 in the North American session. On the release front, US New Home Sales dropped sharply to 494 thousand, short of expectations. In Australia, Construction Work Done missed expectations with a 3.6% decline, while the Wage Price Index posted a gain of 0.5%, very close to the forecast. Later in the day, we’ll get a look at Private Capital Expenditure. The key indicator has posted four consecutive declines, and the markets are braced for another drop in the upcoming release. On Thursday, there are two key releases in the US – Core Durable Goods Orders and Unemployment Claims.

Australian Wage Price Index, a leading indicator of consumer inflation, remains very steady. The index posted a respectable gain of 0.5% in the fourth quarter, close to the forecast of 0.6%. Other inflation indicators have been soft, a result of the collapse in oil prices and weaker Chinese demand. This has led to the RBA maintaining an easing bias, and the central bank has repeatedly said that it is prepared to cut  interest rates, if necessary. However, the markets are forecasting that the RBA will stand pat at next week’s policy meeting and maintain rates at the current 2.00% level.

Is the American consumer more nervous about the economy? The answer is a resounding “yes” according to a key indicator, CB Consumer Confidence. The indicator dropped sharply to 92.2 points in February, well off the estimate of 97.4 points. This marked a three-month low for the key indicator. Weaker consumer confidence could well translate into a decrease in consumer spending, a key driver of economic growth. Meanwhile, the US manufacturing sector continues to struggle. Recent manufacturing reports have pointed to contraction in the sector, and this was again the case with the Richmond Manufacturing report, which slipped to -4 points in February, short of the forecast of +2 points. This was the indicator’s worst reading since September 2015. On Thursday, we’ll get a look at Core Durable Goods Orders, a key manufacturing indicator. The markets are braced for a small gain of 0.2%, and if this release misses the estimate, it could have a sharp impact on the currency markets.

AUD/USD Fundamentals

Tuesday (Feb. 23)

• 19:30 Australian Construction Work Done. Estimate -2.1%. Actual -3.6%
• 10:30 Australian Wage Price Index. Estimate 0.6%. Actual 0.5%

Wednesday (Feb. 24)

• 9:45 US Flash Services PMI. Estimate 53.4 points
• 10:00 US New Home Sales. Estimate 522K. Actual 494K
• 10:30 US Crude Oil Inventories. Estimate 2.0M
• 19:00 US FOMC James Bullard Speaks
• 19:30 Australian Private Capital Expenditure. Estimate -3.1%

Upcoming Key Events

Thursday (Feb. 25)

• 8:30 US Core Durable Goods Orders. Estimate 0.2%
• 8:30 US Unemployment Claims. 271K

*Key releases are highlighted in bold

*All release times are EST

AUD/USD for Wednesday, February 24, 2016

AUD/USD February 24 at 10:15 EST

AUD/USD  Open: 0.7194 Low: 0.7147  High: 0.7212 Close: 0.7148

AUD/USD Technical

• 0.7213 remains busy and has switched to a resistance role following losses by AUD/USD
• The round number of 0.71 is providing support
• Current range: 0.7100 to 0.7213

Further levels in both directions:

• Below: 0.7100, 0.7012 and 0.6931
• Above: 0.7213, 0.7385, 7440 and 0.7533

OANDA’s Open Positions Ratio

AUD/USD ratio continues to show little movement this week. The ratio remains close to an even split between long and short positions, which is 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.