AUD/USD – Aussie Stable After Downbeat RBA Minutes

AUD/USD has steadied on Friday, after sustaining sharp losses a day earlier. In Friday’s European session, the pair is trading in the high-0.92 range. On the release front, RBA released its quarterly Monetary Policy Statement. Australian Home Loans posted a weak gain of 0.2% last month, well short of expectations. In the US, there are no major events on the schedule.

The RBA released its monetary policy statement on Friday, and there wasn’t much good news for the markets. The statement noted that the RBA has lowered its forecast for GDP of 2-3% in the year through June 2015, down from 2.25-3.25% in the May projection. Following suit, the forecast for core inflation dropped from 1.75-2.75%, down from 2.25-3.25%. The RBA added that the unemployment rate was likely to “remain elevated for some time”. Australia’s unemployment rate, which jumped in July, leaped above the US rate for the first time since 2007. This underscores a divergence in monetary policy outlook between the two countries – the US is expected to raise rates next year, while the RBA is unlikely to take similar action with a weak economy. The RBA statement also took note of the high value of the Australian dollar, which has gained about 6% since February.

In Australia, key employment data was dismal on Thursday. Employment Change came in at -0.3 thousand, well off the estimate of +13.5 thousand. As well, the unemployment rate jumped to 6.4%, up from 6.0%. The markets had expected unemployment levels to remain unchanged. Earlier in the week, the RBA held interest rates at 2.50%. The rate has been pegged at this low level since July 2013.

On Thursday, US Unemployment Claims dipped back below the 300 thousand level. The key indicator dropped to 289 thousand, beating the estimate of 305 thousand. The four-week claims average, which is less volatile than the weekly count, dipped to 293,500, its lowest level since February 2006. The stronger numbers point to increased hiring in response to stronger demand, which in turn has contributed to gains in income and stronger consumer spending. An improving job market is critical for economic growth, and the dollar has gained broad strength as key US data points upwards.

PMI releases are closely tracked by analysts, as they are important gauges of the strength of the manufacturing and services sectors. On Tuesday, ISM Non-manufacturing PMI looked sharp, rising to 58.7 points last month. This easily beat the estimate of 56.6, and was the index’s best showing since February 2011. This follows an excellent Manufacturing PMI reading last week, with the index climbing to 57.1 points, a three-year high. There was more positive news on Tuesday, as Factory Orders had an impressive July, gaining 1.1%. These solid numbers point to healthy expansion in the US manufacturing and services sectors, and has boosted the greenback against its major rivals.

AUD/USD for Friday, August 8, 2014

AUD/USD August 8 at 11:55 GMT

AUD/USD 0.9280 H: 0.9282 L: 0.9239

AUD/USD Technical

• AUD/USD was unable to maintain any momentum in the Asian session. The pair has posted gains in European trading.
• On the downside, 0.9229 is an immediate support line. 0.9119 is stronger.
• 0.9361 is the next resistance line.
• Current range: 0.9229 to 0.9361

Further levels in both directions:

• Below: 0.9229, 0.9119 and 0.9020
• Above: 0.9361, 0.9446, 0.9617 and 0.9757

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in long positions on Friday, continuing the direction seen a day earlier. This is consistent with the movement of the pair, as the Australian dollar has posted gains. The ratio has a majority of long positions, indicative of trader bias towards the Australian dollar continuing to move to higher ground.

AUD/USD Fundamentals

• 1:30 RBA Monetary Policy Statement.
• 1:30 Australian Home Loans. Estimate 0.2%. Actual 0.7%.
• 12:30 US Preliminary Nonfarm Productivity. Estimate 1.4%.
• 12:30 US Preliminary Unit Labor Costs. Actual 1.3%.
• 14:00 US Wholesale Inventories. Estimate 0.6%.

* Key releases are highlighted in bold

*All release times are GMT

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.