AUD/USD – Aussie Edges Lower, Australian Retail Sales Next

The Australian dollar is showing limited movement on Wednesday, following strong gains in the Tuesday session. In the North American session, AUD/USD is trading slightly below the 0.76 level. On the release front, US ADP Nonfarm Payrolls improved to 179 thousand, beating the estimate. The ISM Non-Manufacturing PMI came in at 55.5 points, short of expectations. Later in the day, Australia will release Retail Sales, with an estimate of 0.3%. On Thursday, the US releases Unemployment Claims and the RBA will publish a monetary policy statement.

US releases were a mixed bag on Wednesday. July employment numbers started off on the right foot, as ADP Nonfarm Payrolls improved to 179 thousand, beating the estimate of 171 thousand. However, the ISM Non-Manufacturing PMI disappointed, as the index dipped to 55.5 points, missing the estimate of 56.0 points. On Thursday, we’ll get a look at Unemployment Claims, followed by the all-important Nonfarm Payrolls on Thursday. Strong readings could renew speculation of a rate hike in September. Market sentiment has soured on the US dollar since last week’s GDP report, as the gain of 1.2% was well short of the forecast of a 2.6% gain.  The markets have circled September and December as the most likely dates for a rate hike, but if the Fed isn’t satisfied with the economy’s performance, it could delay any moves until 2017.

The RBA has caught the markets off guard on occasion, but there were no surprises on Tuesday when the RBA lowered interest rates. The quarter-point drop, which lowered rates from 1.75% to an all-time low of 1.50%, was widely expected. Still, the response of the Australian dollar may have surprised more than a few market players, as AUD/USD jumped close to 100 points after the RBA’s announcement. The bank cut rates for the second time since May, and analysts expect further cuts are in the pipeline – JPMorgan Chase and Morgan Stanley are both projecting that rates will be at 1 percent by the second quarter of 2017. The new Australian government is reluctant to embark on a large spending program and jeopardize its AAA credit rating, so the RBA appears to be on its own in the fight against deflation. The bank is also concerned about the strength of the Australian dollar, which has jumped close to 10 percent since mid-January. Lowering interest rates is one tool to keep the Aussie’s climb in check, as lower rates make the currency less attractive to investors. Meanwhile, Australian Building Approvals and Trade Balance were dismal, but the markets showed little interest as the RBA rate cut stole the show.

AUD/USD Fundamentals

Wednesday (August 3)

• 8:15 ADP Non-Farm Employment Change. Estimate 171K. Actual 179K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.0. Actual 55.5
• 9:45 US Final Services PMI. Estimate 51.0. Actual 51.4
• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.0. Actual 55.5
• 10:30 US Crude Oil Inventories. Estimate -1.6M. Actual +1.4M
• 21:30 Australian Retail Sales. Estimate 0.3%

Thursday (August 4)

• 8:30 US Unemployment Claims. Estimate 265K
• 21:30 RBA Monetary Policy Statement

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Wednesday, August 3, 2016

AUD/USD August 3 at 10:50 EDT

Open: 0.7597 High: 0.7614 Low: 0.7567 Close: 0.7580

AUD/USD Technical

• AUD/USD has shown limited movement in the Wednesday session
• 0.7560 is under pressure in support
• 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 0.7251
• Above: 0.7701, 0.7835 and 0.7938

OANDA’s Open Positions Ratio

AUD/USD ratio is showing little movement on Wednesday, consistent with the lack of movement from AUD/USD. Long and short positions are close to an even split, indicating a lack of trader bias as to what direction AUD/USD 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.