AUD/USD – Aussie Steady, RBA Leaves Interest Rate at 2.00%

The Australian dollar is showing marginal movement on Tuesday, as AUD/USD trades at 0.7170 early in the North American session. Taking a look at economic releases, the RBA held interest rates at 2.00%. There are no major releases out of the US on Tuesday. We could see stronger movement from the pair on Wednesday, as there are a host of key releases. Australia releases Retail Sales and Trade Balance, while in the US there are three major releases, led by Nonfarm Payrolls. As well, Janet Yellen will testify before the House Financial Services Committee in Washington.

The Australian economy has been hit hard by the weaker global demand, particularly from China, Australia’s number one trade partner. With the economy marked by sluggish growth and low inflation, there was speculation that the RBA would lower rates for a third time in 2015. Although the decision was close, the central bank voted not to take any action and left the benchmark rate at an even 2.00%. Following the statement, RBA Glenn Stevens hinted that the RBA could cut rates if inflation levels did not improve. Recent inflation numbers did not impress, as CPI, which is released quarterly, softened to 0.5% in the third quarter, shy of the estimate of 0.7%. Trimmed Mean CPI slipped to 0.3%, its lowest gain since Q1 of 2014. Will the RBA press the rate trigger in December? The markets will be keeping a close watch, and monetary divergence with the Federal Reserve will likely continue to weigh on the Australian dollar.

Last week, the Federal Reserve caught the markets off guard with a hawkish policy statement. The Fed stated that a rate hike was a possibility in December, depending on the strength of employment and inflation numbers. The markets had essentially written off a move by the Fed before 2016, so the statement caused sharp volatility in the currency markets, with the US dollar showing broad gains after the dust had settled. The next Fed meeting is mid-December, and the markets will be in alert mode for any further hints about a rate hike. As well, upcoming key US numbers will be closely monitored, especially employment and inflation data, as the strength of these numbers will play a critical role in determining whether the Fed presses the rate trigger in December. Still, traders should keep in mind that the markets sometimes overreact to Fed statements or comments from Fed policymakers, and the central bank could easily continue to wait on the sidelines until 2016.

With the Federal Reserve statement behind us, the markets are once again focused on economic releases. There was much anticipation ahead of the US Advance GDP for the third quarter, which was released on Thursday. As it turned out, this key event didn’t shake up the markets, as the reading of a 1.5% gain was almost identical to the forecast of 1.6%. Still, this figure was much lower than the Q2 Final GDP of 3.9%, pointing to a slowdown in the US economy. Meanwhile, Unemployment Claims beat the estimate for a fourth straight week, coming in at 260 thousand. The estimate stood at 264 thousand. Will the upcoming Nonfarm Payrolls also beat the forecast? On Friday, US key releases wound up the week on a positive note. Employment Cost Index jumped 0.6%, pointing to an increase in wages for US workers. The UoM Consumer Sentiment, an important gauge of consumer confidence, improved to 90.0 points, within expectations.

AUD/USD Fundamentals

Tuesday (Nov. 3)

•  15:00 US Factory Orders. Estimate -0.8%
• 15:00 US IBD/TIPP Economic Optimism. Estimate 47.5 points
• All Day – US Total Vehicle Sales. Estimate 17.8M
• 22:30 Australian AIG Services Index

Upcoming Key Events

Wednesday (Nov. 4)

• 00:30 Australian Retail Sales. Estimate 0.4%
• 00:30 Australian Trade Balance. Estimate -2.85B
• 13:15 US ADP Nonfarm Employment Change. Estimate 183K
• 13:30 US Trade Balance. Estimate -42.7B
• 15:00 Federal Reserve Chair Janet Yellen Testifies
• 15:00 US ISM Non-Manufacturing PMI. Estimate 56.6 points
  
• 10:25 RBA Governor Glenn Stevens Speaks

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD for Tuesday, November 3, 2015

AUD/USD November 3 at 13:55 GMT

AUD/USD 0.7172 H: 0.7219 L: 0.7106

AUD/USD Technical

• AUD/USD posted gains in the Asian session, but has surrendered these gains in the European and North American sessions.
• The round number of 0.71 is an immediate support level.
• 0.7213 is a weak resistance line and could be tested in the North American session.
• Current range: 0.7100 to 0.7213

Further levels in both directions:

• Below: 0.7100, 0.7060 and 0.70
• Above: 0.7213, 0.7440, 0.7664 and 0.7770

OANDA’s Open Positions Ratio

AUD/USD ratio is showing some movement towards short positions. However, long positions continue to have a solid majority (56%), indicative of trader bias in favor of the Australian dollar 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.