AUD/USD – Aussie Edges Higher on Strong Business Profits, Employment Report

AUD/USD has posted slight gains on Monday, as the pair trades slightly below the 0.76 level. On the release front, Australian Company Operating Profits jumped 6.9%, while ANZ Job Advertisements gained 1.8%. However, AIG Services Index dropped to 45.0 points. There are no US events on Monday, as the US markets are closed for Labor Day. Tuesday will be a busy day, as Australia releases the Cash Rate and GDP. The US will publish the ISM Non-manufacturing PMI.

Australian business and employment indicators looked sharp on Monday. Company Operating Profits jumped 6.9% in the second quarter, its strong gain in six years. The ANZ Job Advertisement report rebounded in August with a strong gain of 1.8%, marking a 3-month high. The AIG Services Index disappointed, as the indicator dropped to 45.0, pointing to contraction for the first time since April. Market attention will now shift to the RBA, which will set interest rates on Tuesday. Currently, the rate is at 1.50%. The bank has not hesitated to lower rates, with two quarter-point cuts in 2016. The markets are not expecting any move at the bank’s September meeting.

US employment numbers were dismal on Friday. Nonfarm Payrolls plunged to 151 thousand in August, down from 255 thousand a month earlier. Wage growth also disappointed, as Average Hourly Earnings edged lower to o.1%, shy of the forecast of 0.2%. Clearly this was not positive news, but August job data is often unreliable and tends to miss market forecasts. This may have helped the US dollar dodge a bullet, as the greenback was unchanged against the Aussie on Friday, despite the dismal payrolls release. Will the Fed also give a “free pass” and ignore the weak job data? The markets apparently think so, as the odds of a rate hike this year are about the same after the payrolls report – the  the likelihood of a September hike is 20 percent, while a December increase is pegged at 60 percent. Still, even if the August payrolls release is overlooked, the Fed will find it hard to justify a rate increase strictly based on a robust job market. Stronger inflation numbers for August, for example, would make a rate hike an easier sell to Fed members who remain uneasy about raising rates. Key inflation indicators will be released in mid-September, just before the Fed policy meeting on September 21. A lot can happen between now and the Federal Reserve’s policy meeting on September 21, so key US releases will be under the market microscope ahead of the Fed’s rate decision. 

AUD/USD Fundamentals

Sunday (September 4)

• 19:30 Australian AIG Services Index. Actual 45.0
• 21:00 Australian MI Inflation Gauge. Actual 0.2%
• 21:30 Australian Company Operating Profits. Estimate 6.9%. Actual 2.1%
• 21:30 Australian ANZ Job Advertisements. Actual 1.8%

Monday (September 5)

• 21:30 Australian Current Account. Estimate -20.2B 

Tuesday (September 6)

• 00:30 Australian Cash Rate. Estimate 1.50%
• 00:30 Australian RBA Rate Statement
• 10:00 US ISM Non-Manufacturing PMI. Estimate 55.4
• 21:30 Australian GDP. Estimate 0.4%

*All release times are EDT

* Key events are in bold

AUD/USD for Monday, September 5, 2016

AUD/USD September 5 at 9:35 EDT

Open: 0.7564 High: 0.7606 Low: 0.7564 Close: 0.7580

AUD/USD Technical

• AUD/USD posted slight gains in the Asian session. The pair has since reversed directions, recording slight losses in the European and North American sessions.
• 0.7650 is a weak support line and could be tested during the North American session
• 0.7701 is a strong resistance line
• Current range: 0.7560 to 0.7701

Further levels in both directions:

• Below: 0.7560, 0.7440, 0.7339 and 0.7200
• Above: 0.7701, 0.7835 and 0.7938

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged on Monday, consistent with the lack of movement from AUD/USD. Currently, long positions have a majority (54%), indicative of trader bias towards AUD/USD continuing to move to higher ground.

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.