AUD/USD – Aussie Posts Gains After RBA Statement Mum on Further Cuts

The Australian dollar has edged higher on Friday, continuing the upward movement seen in the Thursday session. AUD/USD is currently trading at 0.7660. In economic news, the RBA released its monetary policy statement. In the US, employment numbers will be in the spotlight, with three key releases – Average Hourly Earnings, Nonfarm Employment Change and the Unemployment Rate. Traders should be prepared for possible volatility from AUD/USD following these key employment releases.

The Australian dollar has posted gains this week, despite the RBA rate cut and a weak Retail Sales report. As expected, the RBA lowered rates from 1.75% to an all-time low of 1.50%. The currency also shrugged off a soft Retail Sales report on Thursday. In June, Retail Sales posted a negligible gain of 0.1%, shy of the forecast of 0.4% and a 4-month low. Consumer spending has been under pressure from weak wage growth as well as very low inflation. Will the RBA’s rate cut this week be enough to boost inflation levels? The RBA followed up with its quarterly policy statement on Friday. There were no clues regarding further rate cuts, although the many economists are projecting further cuts, saying rates could drop to as low as 1% in 2017. The statement said that inflation levels will likely remain under the 2 percent level until 2018, and cited the Australian dollar and China as two sources of uncertainty with regard to growth and inflation forecasts.

The US dollar remains under pressure, as market expectations of a rate hike in the US this year have decreased following a disappointing GDP report last week. Currently, the odds of a rate hike in September are just 9 percent, while the chances of a December hike stand at 32 percent. However, these numbers could quickly change after Friday’s Nonfarm payrolls report. Fed chair Janet Yellen and her colleagues have sounded cautious about the health of the economy, and the July Fed statement provided no clues as to the timeline of a possible rate hike. Clearly, any rate move will be data-dependent, and the Fed policymakers will want to see stronger inflation or employment numbers before seriously contemplating a rate increase. If Friday’s job releases do not beat expectations, a rate hike in September will almost certainly be off the table. This week’s employment data has been a mix, as ADP Nonfarm Payrolls improved and beat expectations, while Unemployment Claims were up slightly and missed the estimate. Nonfarm Payrolls posted a huge gain of 287 thousand in June, but is expected to return to more normal levels in the July report, with an estimate of 180 thousand.

AUD/USD Fundamentals

Thursday (August 4)

• 21:30 RBA Monetary Policy Statement

Upcoming Key Events

Friday (August 5)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Non-Farm Employment Change. Estimate 180K
• 8:30 US Unemployment Rate. Estimate 4.8%
• 8:30 Trade Balance. Estimate -42.1B
• 15:00 US Consumer Credit. Estimate 15.5B

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Friday, August 5, 2016

AUD/USD August 5 at 8:10 EDT

Open: 0.7639 High: 0.7664 Low: 0.7621 Close: 0.7661

AUD/USD Technical

• AUD/USD posted small gains in the Asian session  and has been flat in European trade
• 0.7560 is providing support
• There is resistance at 0.7701
• 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 Friday. Short positions have a slight majority (54%), indicating slight trader bias towards AUD/USD losing 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.