AUD/USD – Flat Ahead of RBA Rate Announcement

The Australian dollar is flat on Monday, as AUD/USD trades at 0.7136 in the North American session. Taking a look at economic releases, Australian Building Approvals posted a gain of 2.2%, beating expectations. Early Tuesday, the RBA will publish its Cash Rate. In the US, the key event of the day, ISM Manufacturing PMI, came in at 50.1 points, very close to the forecast of 50.0 points.

All eyes are on the RBA, which will make an interest rate announcement on Tuesday. The rate currently stands at an even 2.0%, and the central bank is not expected to make any changes. Still, traders should keep in mind that the RBA has lowered rates twice in 2o15, catching the markets off guard each time and sending the Aussie lower. With the Australian economy not in the best of shape, a rate cut should not be completely discounted. Last week, Australia released CPI, which is released quarterly. The index 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. These readings point to softer inflation levels, as domestic and global demand for Australian products has weakened, hurting the economy and the Australian dollar.

The Federal Reserve surprised the markets last week, issuing a policy statement which was more hawkish and transparent than expected. The Fed said that a rate hike was a possibility in December, depending on 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. With 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, key US numbers will be closely monitored, especially employment and inflation data, as the strength of these numbers in the next several weeks will play a critical role in determining whether the Fed will press 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 can once again focus 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 is 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. On Friday, US key releases wound up the week on a positive note. Employment Cost Index jumped to 0.6%, pointing to an increase in wages for US workers. The UoM Consumer Sentiment improved to 90.0 points, within expectations.

AUD/USD Fundamentals

Monday (Nov. 2)

• 3:30 Australian Building Approvals. Estimate 1.8%. Actual 2.2%
• 5:30 Australian Commodity Prices. Actual -19.8%
• 14:45 US Final Manufacturing PMI. Estimate 54.0 points. Actual 54.1 points
• 15:00 US ISM Manufacturing PMI. Estimate 50.0 points. Actual 50.1. points
• 15:00 US Construction Spending. Estimate 0.5%. Actual 0.6%
• 15:00 US ISM Manufacturing Prices. Estimate 39.5 points. Actual 39.0 points
• 17:00 FOMC Member John Williams Speaks
• 19:00 US Loan Officer Survey

Upcoming Key Events

Tuesday (Nov. 3)

• 3:30 RBA Cash Rate. Estimate 2.00%
• 3:30 RBA Rate Announcement

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD for Monday, November 2, 2015

AUD/USD November 2 at 15:20 GMT

AUD/USD 0.7142 H: 0.7153 L: 0.7128

AUD/USD Technical

• AUD/USD has shown very little movement throughout the day.
• The round number of 0.71 is 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

Long positions continue to have a solid majority (60%), 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.