AUD/USD – Markets Eye Aussie Employment Numbers

AUD/USD is showing little movement on Wednesday, as the pair trades at 0.7260 in the North American session. In the US, inflation levels remain listless, as PPI posted a decline of 0.5%, missing expectations. Retail sales numbers were mixed, as Retail Sales posted a gain of 0.2%, while Core Retail Sales declined 0.1%. Australia releases Employment Change later in the day. Traders should keep a close eye on Thursday’s key releases out of the US, highlighted by CPI.

US numbers on Wednesday were a mix. Retail Sales was up 0.2%, while Core Retail Sales posted a slight decline of 0.1%. Both readings were within expectations. The news was not good on the inflation front, as PPI, the principal gauge of inflation in the manufacturing sector, declined by 0.5% in September, its weakest showing since February. We’ll get another look at inflation indicators on Thursday, with the release of CPI. The markets are keeping expectations low, with an estimate of -0.2%. The estimate for Core CPI stands at +0.2%, so we could be in for a mixed bag, just as we saw with retail sales numbers on Wednesday.

Federal Reserve policymakers are strongly divided on the question of a rate hike in 2015. This was underscored on Monday by FOMC member Lael Brainard, who stated that the Fed should not raise rates before global economic conditions improve. Brainard noted that the Chinese slowdown has caused economic turmoil worldwide, and the US economy could lose steam due to weaker exports and weak global economic conditions. Clearly, Brainard is of the view that the Fed should take its time and proceed with caution. With global economic conditions unlikely to change anytime soon, a rate move may be on hold unless the US posts some key releases, such as GDP or employment numbers, which match or beat expectations.

A very different view was put forth on Monday by another FOMC member, Dennis Lockhart. Lockhart, considered a centrist on monetary policy, sounded more optimistic about a rate hike before the end of 2015. Lockhart did not rule out a rate hike in October, and added that the Fed would have more data to evaluate before its December policy meeting. With FOMC members sending out such conflicting messages, it is no wonder that the markets have been unable to get a handle on the timing of a rate hike, and this failure of the Fed to communicate a clear message to the Fed has hurt the US dollar, as we saw after the release of the Fed minutes last week.

In Australia, NAB Business Confidence recovered in September, rebounding from its worst reading in two years. The key indicator improved to 5 points, which points to stronger confidence from the business sector in the economy. Westpac Consumer Confidence followed suit, surging 4.2% in October. Chinese key reports were mixed, as the trade surplus remained steady at $60.3 billion well above the forecast of $46.9 billion. However, CPI slipped to 1.6% in September, compared to 2.0% a month earlier. Analysts are saying the RBA could lower rates to 1.75% before the end of the year, and increasing expectations in the market for a rate cut could send the Aussie to lower levels.

AUD/USD Fundamentals

Wednesday (Oct. 14)

• 12:30 US Core Retail Sales. Estimate -0.1%.
• 12:30 US PPI. Estimate -0.2%.
• 12:30 US Retail Sales. Estimate 0.2%.
• 12:30 US Core PPI. Estimate 0.1%.
• 14:00 US Business Inventories. Estimate 0.1%.
• 18:00 US Beige Book.

Upcoming Key Events

Thursday (Oct. 15)

• 00:30 Australian Employment Change. Estimate 7.2 thousand.
• 00:30 Australian Unemployment Rate. Estimate 6.2%.
• 12:30 US CPI. Estimate -0.2%.
• 12:30 US Core CPI. Estimate 0.1%.
• 12:30 US Unemployment Claims. Estimate 269K.
• 14:00 US Philly Fed Manufacturing Index. Estimate -1.8 points.

AUD/USD for Wednesday, October 14, 2015

USD/JPY October 14 at 17:55 GMT

USD/JPY 0.7258 H: 0.7294 L: 0.7200

AUD/USD Technical

• 0.7213 is a weak support level. The round number of 0.71 is stronger.
• 0.7440 is a strong resistance line.
• Current range: 0.7213 to 0.7440

Further levels in both directions:

• Below: 0.7213, 0.7100, 0.7060 and 0.70
• Above: 0.7440, 0.7664, 0.7770 and 0.7849

OANDA’s Open Positions Ratio

AUD/USD ratio has a solid majority of long positions (55%), indicative of trader bias towards 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.