AUD/USD: Aussie Shrugs Off Weak Construction Report

AUD/USD is showing limited movement, as the currency continues to have a quiet week. Currently, the pair is trading slightly above the 0.76 level. On the release front, Australian Construction Work Done posted a sharp decline of 3.9%, well short of expectations. In the US, today’s highlight is Existing Home Sales, with the indicator expected to dip to 5.52 million. On Thursday, the US releases two key events – Core Durable Goods report and Unemployment Claims.

The Australian dollar shrugged off a dismal construction report on Tuesday. Construction Work Done declined 3.7% in the second quarter, compared to an estimate of -1.9%. The indicator has managed just one gain in the past nine quarters, pointing to ongoing weakness in the construction industry. The poor reading could have a negative impact on second quarter GDP, which will be released on September 6. The economy will be hard-pressed to replicate first-quarter growth, which recorded an impressive gain of 1.1 percent.

US numbers were a mix on Tuesday. The Richmond Manufacturing Index dropped sharply, dropping 11 points. The markets had expected a strong gain of plus -6. There was much better news from the housing sector, as New Home Sales jumped to 654 thousand, marking a 12.4 percent increase. This was the highest number of new home sales since 2008, pointing to strong consumer demand. Will Existing Home Sales follow suit with a strong release? The indicator came in at 5.57 million in June, and the estimate stands at 5.55 million.

With the upcoming Jackson Hole meeting in focus, investors are sticking to the safety of the sidelines, unwilling to make any major moves. This has resulted in a lack of movement in the currency markets so far this week. The conference, which begins on Thursday, will bring together the heads of central banks and other senior financial officials. The markets will be looking for hints from Federal Reserve chair Janet Yellen regarding the Fed’s monetary plans, particularly the timing of a rate hike. FOMC members are expected to express their views in the days leading to the crucial meeting. Fed Vice Chairman Stanley Fischer took the opportunity and sounded upbeat about the US economy, saying that the Fed was close to its aims of a full labor market and the inflation target of 2 percent. The latter claim sounds a bit optimistic, as US inflation levels have consistently been closer to zero than the 2 percent level. Janet Yellen will likely address the inflation issue at Jackson Hole, as inflation levels will be a crucial factor in whether the Fed pulls the rate trigger before 2017. The odds of a September hike are only about 12%, while the likelihood of a December move is around 40%.

AUD/USD Fundamentals

Tuesday (August 23)

  • 21:30 Australian Construction Work Done. Estimate -1.9%. Actual -3.7%

Wednesday (August 24)

  • 9:00 US HPI. Estimate 0.3%
  • 10:00 US Existing Home Sales. Estimate 5.52M
  • 10:30 US Crude Oil Inventories. Estimate -0.5M

Thursday (August 25)

  • 8:30 US Unemployment Claims. Estimate 265K
  • 8:30 US Core Durable Goods Orders. Estimate 0.4%
  • All Day – Jackson Hole Symposium

*All release times are EDT

* Key events are in bold

AUD/USD for Wednesday, August 24, 2016

AUD/USD Aug 23 to 25 Chart

AUD/USD August 24 at 6:50 EDT

Open: 0.7612 High: 0.7634 Low: 0.7588 Close: 0.7621

AUD/USD Technical

  • AUD/USD was flat in the Asian session and has posted small gains in the European session
  • There is resistance at 0.7701
  • 0.7560 is providing support
  • Current range: 0.7560 to 0.7701

Further levels in both directions:

  • Below: 0.7560, 0.7440 and 0.7339
  • Above: 0.7701, 0.7835, 0.7938 and 0.8045

OANDA’s Open Positions Ratio

AUD/USD ratio is unchanged on Wednesday, reflective of the lack of movement from AUD/USD. Currently, short and long positions are evenly split, indicative of a lack of trader bias as to what direction AUD/USD will take next.

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