AUD/USD – Aussie Hugging 0.71 Line Ahead of FOMC Minutes

The Australian dollar continues to drift this week, as AUD/USD trades just under the 0.71 line in Wednesday’s North American session. In economic news, the Australian Wage Price Index posted a gain of 0.6% in the third quarter, matching the forecast. Over in the US, Building Permits improved to 1.15 million, matching the forecast. The shift now focuses to the Federal Reserve, which releases the minutes of its October policy meeting later in the day. The minutes could provide the markets with some insight as to Fed policymakers’ views regarding a rate move in December.

Will the Fed press the rate trigger at its December meeting? The guessing game continues as to whether the Federal Reserve will kick off a series of rate hikes in December, so the markets will be carefully combing through the Fed minutes, which will be released later on Wednesday. Market expectations have risen to 66% that the Fed will make a move next month. The last time the Fed raised interest rates was in June 2006, so such a dramatic move is sure to have a significant effect on the global currency markets. With the US economy close to full employment and many economic indicators pointing upwards, one of the last pieces in the puzzle is inflation. Last week’s PPI was awful, posting a second straight decline. On Tuesday, CPI and Core CPI posted small gains of 0.2%, matching the forecast. Are these lukewarm readings enough to convince the Fed to make a move in December? The Fed has said that inflation levels are an important factor in determining its decision in December, but with US inflation stuck at low levels, it remains a guessing game as to whether the Fed will press the rate trigger at its next policy meeting.

The US economy has certainly improved, but the manufacturing sector continues to lag behind. Earlier this week, the Empire State Manufacturing Index posted its fourth straight decline, underlining worsening conditions in the manufacturing sector. In November, the indicator came in at -10.7 points, weaker than the forecast of -5.3 points. On Thursday, we’ll get another look at manufacturing data, with the release of the Philly Fed Manufacturing Index. This indicator has also struggled, posting two straight declines. The markets are expecting some improvement in the November report, with an estimate of 0.1 points.

AUD/USD Fundamentals

Wednesday (Nov. 18)

• 00:30 Australian Wage Price Index. Estimate 0.6%. Actual 0.6%
• 13:00 US FOMC Member William Dudley Speaks
• 13:30 US Building Permits. Estimate 1.15M. Actual 1.15M
• 13:30 US Housing Starts. Estimate 1.16M. Actual 1.06M
• 15:30 US Crude Oil Inventories. Estimate 2.0M.
• 19:00 US FOMC Meeting Minutes

Upcoming Key Events

Thursday (Nov. 19)

• 13:30 US Unemployment Claims. Estimate 272K
• 15:00 US Philly Fed Manufacturing Index. Estimate 0.1 points

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD for Wednesday, November 18, 2015

AUD/USD November 18 at 15:25 GMT

AUD/USD 0.7094 H: 0.7118 L: 0.7090

AUD/USD Technical

• AUD/USD has shown marginal movement throughout the day, as the pair continues to hug the 0.71 line.
• The round number of 0.71 was tested earlier and remains under pressure.
• On the downside, 0.7063 is protecting the symbolic 0.70 level. It is a weak line.
• Current range: 0.7063 to 0.7100

Further levels in both directions:

• Below: 0.7063, 0.7000 and 0.6931
• Above: 0.7100, 0.7213, 0.7440 and 0.7526

OANDA’s Open Positions Ratio

AUD/USD ratio is unchanged on Wednesday, reflective of a lack of movement from the pair. Long positions have a slight majority (53%), which is indicative of a slight trader bias in favor of the Australian dollar breaking out and moving to higher levels.

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.