AUD/USD – Aussie Shrugs off Dismal Australian Capital Spending

The Australian dollar has posted small losses on Thursday, as AUD/USD trades at 0.7220 in the North American session. Traders can expect light trade during the day, as US markets are closed for the Thanksgiving holiday. In Australia, Private Capital Expenditure was dismal in the third quarter, posting a sharp decline of 9.2%.

With no US releases on Thursday, Australian Private Capital Expenditure was in the spotlight, but ended up being a huge disappointment. The key indicator came in at -9.2% in the third quarter, surprising the markets, which had expected a reading of -2.8%. The report also indicated that the falloff in business spending is expected to continue, as companies expect to invest some 20.9% less in the current fiscal year compared to the previous fiscal year. This does not bode well for the Australian economy, which has been hampered by a sharp drop in mining investment and softer demand from China for Australian raw materials. The Australian dollar remains steady, as it posted small losses following this release.

On Wednesday, key releases out of the US painted a mixed picture. Unemployment Claims plunged to 260 thousand, well off the estimate of 273 thousand. There was more good news from Core Durable Goods, which rebounded with a strong gain of 0.5%, matching the forecast. UoM Consumer Sentiment improved to 91.3 points, but the markets were overly optimistic, as the estimate stood at 93.2 points. This consumer confidence indicator comes on the heels of CB Consumer Confidence, which dropped to 90.4 points, nowhere close to the estimate of 99.3 points. These weak consumer confidence readings could raise concerns, as soft consumer confidence numbers could translate into weaker consumer spending, which is a key driver of economic growth.

The guessing game continues – will the Federal Reserve pull the rate trigger in December? Last week’s Fed minutes did not confirm a rate hike, but most analysts feel that the long-awaited move will indeed occur next month. The Fed hinted at a rate hike in its October policy statement, and the markets have been abuzz ever since. Last week, New York Fed President William Dudley said there is a “strong case” for a rate hike in December as long as economic data remains strong. With the US economy showing improvement and employment and consumer indicators pointing upwards, the markets appear prepared for a small hike of 0.25% or 0.50%, and there is a growing view that modest, incremental moves will not cause turbulence on the global markets. One fly in the ointment is that of weak inflation levels, as the Fed has repeatedly stated that inflation is a key consideration in any decision to raise rates. With the critical Fed meeting only a few weeks away, every key indicator and comment from a Fed member will be under close scrutiny from the markets.

AUD/USD Fundamentals

Thursday (Nov. 26)

• 00:30 Australian Private Capital Expenditure. Estimate -2.8%. Actual -9.2%
• All Day – US Bank Holiday

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD for Thursday, November 26, 2015

AUD/USD November 26 at 14:30 GMT

AUD/USD 0.7223 H: 0.7262 L: 0.7210

AUD/USD Technical

• AUD/USD posted slight losses in the Asian session and has been shown marginal movement in the European and North American sessions.
• 0.7213 remains a weak support line.
• 0.7440 is a strong resistance line.
• Current range: 0.7213 to 0.7440

Further levels in both directions:

• Below: 0.7213, 0.7100, 0.7063 and 0.7000
• Above: 0.7440, 0.7526 and 0.7644

OANDA’s Open Positions Ratio

AUD/USD ratio is showing little movement, consistent with the lack of movement from the pair. Long and short positions remain close to an even split. This is indicative of a lack of trader bias as to what 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.