AUD/USD – Rejuvenated Aussie Punches Above 72

The Australian dollar has posted strong gains on Thursday, as the pair is trading just above the 0.72 line in the European session. On the release front, Australian NAB Quarterly Business Confidence jumped to 4 points. Later in the day, Australia will release the RBA monetary policy statement and Retail Sales. In the US, Challenger Job Cuts posted a strong reading of 41.6%. Today’s key US release is Unemployment Claims, with the key indicator expected to remain steady at 279 thousand.

The Aussie has looked very sharp, gaining close to 200 points since Tuesday. There was positive news out of Australia as the NAB Quarterly Business Confidence in the fourth quarter, well above the previous quarter’s reading of 0 points. The Australian dollar also took advantage of weak US numbers, as ADP Nonfarm Payrolls and the ISM Non-Manufacturing PMI both softened in January. The ADP report, which precedes the official NFP report on Friday, dropped to 205 thousand in January, compared to 257 thousand a month earlier. The figure did beat the estimate of 193 thousand, but recent employment data has been lukewarm, raising eyebrows in the markets about the health of the US economy. There was no relief from ISM Non-Manufacturing PMI, a key gauge of the services sector. The index dipped to 53.2 points in January, its worst showing since March 2014. This week’s strong Aussie rally could continue if Unemployment Claims and Nonfarm Payrolls fail to meet expectations.

As widely expected, the RBA maintained interest rates at the round number of 2.00%. The RBA sounded optimistic about the local economy in its rate statement, noting “there were reasonable prospects for continued growth”. RBA Governor Glenn Stevens added that continuing low inflation could lead to easier monetary policy if demand increased. The RBA has adopted a wait-and-see attitude to recent market turmoil and China slowdown. The central bank has often made reference to the Australian dollar, but sufficed this time with a rather bland statement that “the exchange rate has continued its adjustment to the evolving economic outlook”. Although the RBA didn’t make a move this time around, a rate cut later in 2016 remains a strong possibility. The markets will be looking for more clues from the upcoming rate statement regarding the RBA’s monetary plans in the next few months.

One of the key factors in the Federal Reserve decision to raise rates in December was the strength of the labor market. However, employment numbers have been lukewarm in early 2016. The Federal Reserve will likely want to see stronger job numbers before pressing the rate trigger again in March. In the heady days following the Fed’s historic rate hike, there was talk of up to four rate hikes in 2016, but this appears unlikely, given current economic conditions and the collapse of oil prices, which has kept low inflation in check.

AUD/USD Fundamentals

Wednesday (Feb. 3)

• 19:30 Australian NAB Quarterly Business Confidence. Actual 4 points

Upcoming Key Events

Thursday (Feb. 4)

• 2:15 US FOMC Member Eric Rosengren Speaks
• 7:30 US Challenger Job Cuts. Actual 41.6%
• 8:30 US Unemployment Claims. Estimate 279K
• 8:30 US Preliminary Nonfarm Productivity. Estimate -1.5%
• 8:30 US Preliminary Unit Labor Costs. Estimate 3.9%
• 10:00 US Factory Orders. Estimate -2.5%
• 10:30 US Natural Gas Storage. Estimate -170B
• 19:30 RBA Monetary Policy Statement
• 19:30 Australian Retail Sales. Estimate 0.5%

Friday (Feb. 5)

• 8:30 US Nonfarm Employment Change. Estimate 189K
• 8:30 US Average Hourly Earnings. Estimate 0.3%

*Key events are in bold

*All release times are EST

AUD/USD for Thursday, February 4, 2016

AUD/USD February 4 at 8:05 EST

AUD/USD  Open: 0.7156 Low: 0.7156  High: 0.7234  Close: 0.7210

AUD/USD Technical

• The pair was flat in the Asian session and has posted gains in European trade
• 0.7100 has strengthened in support as the pair continues to move higher.
• 0.7213 is under strong pressure in resistance and could break during the day.
• Current range: 0.7100 to 0.7213

Further levels in both directions:

• Below: 0.7100, 0.7063, 0.6931 and 0.6848
• Above: 0.7213, 0.7385 and 0.7489

OANDA’s Open Positions Ratio

AUD/USD ratio is showing little movement despite continuing gains by AUD/USD. Long and short positions are close to evenly split, which is indicative of a lack of trader bias as to which direction the pair will take next.

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.