AUD/USD – Aussie Under Pressure as US Numbers Beat Expectations

The Australian dollar is showing modest losses on Wednesday, as AUD/USD trades at 0.7150 early in the North American session. Taking a look at economic releases, Australian Retail Sales posted a modest gain of 0.4%, within expectations. Australia’s trade deficit narrowed to A$-2.32 billion, marking the smallest deficit in 6 months. Over in the US, ADP Nonfarm Payrolls was very close to the forecast, and Trade Balance and ISM Services PMI both beat expectations. As well, Fed Chair Janet Yellen continues her testimony on Capitol Hill, as she speaks before the House Financial Services Committee.

It was a positive day for US numbers, and this helped boost the US dollar. ADP Nonfarm Payrolls, which precedes the official Nonfarm Payroll report, came in at 182 thousand, very close to the forecast but well off last month’s reading of 200 thousand. The September US trade deficit narrowed to $40.8 billion, its lowest level since February. There was more good news from the ISM Non-Manufacturing PMI, which jumped to 59.1 points, easily beating the estimate of 56.6 points.

With a rate hike from the Fed back on the table, the markets will be keeping a close eye on US key releases, especially employment and inflation numbers. There was much anticipation ahead of the US Advance GDP for the third quarter, which was released last week. 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. We’ll get a look at a host of additional job numbers this week, with the release of unemployment claims and the unemployment rate on Thursday and Nonfarm Payrolls on Friday. Nonfarm Payrolls is expected to improve in the October reading, and if the indicator beats expectations, the dollar could make broad gains.

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 might lower rates for a third time in 2015. Although this week’s rate 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.

AUD/USD Fundamentals

Wednesday (Nov. 4)

• 00:30 Australian Retail Sales. Estimate 0.4%. Actual 0.4%.
• 00:30 Australian Trade Balance. Estimate -2.85B. Actual -2.32B
• 10:30 FOMC Member Lael Brainard Speaks
• 13:15 US ADP Nonfarm Employment Change. Estimate 183K. Actual 182K
• 13:30 US Trade Balance. Estimate -42.7B. Actual -40.8B
• 14:45 US Final Services PMI. Estimate 54.6 points Actual 54.8 points
• 15:00 Federal Reserve Chair Janet Yellen Testifies
• 15:00 US ISM Non-Manufacturing PMI. Estimate 56.6 points. Actual 59.1 points
• 15:30 US Crude Oil Inventories. Estimate 2.5M. Actual 2.8M
• 19:30 FOMC Member William Dudley Speaks
• 10:25 RBA Governor Glenn Stevens Speaks

Upcoming Key Events

Thursday (Nov. 5)

• 13:30 US Unemployment Claims. Estimate 263K
  

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD for Wednesday, November 4, 2015

AUD/USD November 4 at 17:30 GMT

AUD/USD 0.7150 H: 0.7224 L: 0.7137

AUD/USD Technical

• AUD/USD continued the pattern we saw on Tuesday. The pair posted gains in the Asian session, but surrendered these gains and continued to lose ground in the European session. AUD/USD has posted marginal losses in the North American session.
• The round number of 0.71 remains a weak support level.
• 0.7213 is an immediate resistance line.
• 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 unchanged, consistent with the lack of significant movement from the pair. 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.