Aussie Sags On Job Numbers, Fed Minutes

The Australian dollar remains under pressure, as the pair trades close to the 0.72 line in the North American session. On the release front, Australian Employment Change came in at 10.8 thousand, short of expectations. However, the unemployment rate remained at 5.7%, just below the estimate of 5.8%. In the US, the Philly Fed Manufacturing Index dropped 1.8 points, disappointing the markets. Unemployment Claims dropped sharply to 278 thousand, within expectations.

The Aussie took a hit on Wednesday, losing about 100 points to its US counterpart. The currency reacted negatively to the Australian Employment Change report, which slipped to 10.8 thousand, compared to 26.1 thousand a month earlier. The Fed minutes, which were more hawkish than expected, further pushed down on AUD/USD. In the RBA minutes, released on Monday, the RBA noted its concern over weak wage growth, and Wednesday’s wage growth report will only exacerbate those worries. The Wage Price Index posted a gain of just 0.4%, its lowest gain in more than 9 years. This soft number is reflective of very low inflation levels, which could prod the RBA to make a rate move after the national election in July.

The highly-anticipated Federal Reserve minutes were released on Wednesday. The minutes indicated that a June rate hike remains firmly on the table, and the currency markets have reacted with strong volatility. According to the minutes, the Fed wants to see stronger growth in the second quarter as well as better numbers from the inflation and employment fronts. If this is achieved, the Fed said it “likely would be appropriate” to raise rates at the June meeting. This message is somewhat hawkish, as statements from Fed chair Janet Yellen were more cautious in nature, dampening speculation about a June hike. The markets were skeptical that June would be a “live meeting”, but there are no more doubters that the June meeting will be crucial, as it could mark the Fed’s first interest rate hike this year. With the Fed saying that a key factor in a rate hike decision will be the strength of the US economy, key economic indicators will be under the market microscope.

AUD/USD Fundamentals

Wednesday (May 18)

  • 21:30 Australian Employment Change. Estimate 12.1K. Actual 10.8K
  • 21:30 Australian Unemployment Rate. Estimate 5.8%. Actual 5.7%

Thursday (May 19)

  • 8:30 US Philly Fed Manufacturing Index. Estimate 3.2. Actual -1.8
  • 8:30 US Unemployment Claims. Estimate 276K. Actual 278K
  • 9:15 US FOMC Member Stanley Fischer Speaks
  • 10:00 US CB Leading Index. Estimate 0.4%
  • 10:30 US Natural Gas Storage. Estimate 75B

Upcoming Key Events

Friday (May 20)

10:00 US Existing Home Sales. Estimate 5.40M

*Key releases are highlighted in bold

*All release times are EDT

AUD/USD for Wednesday, May 18, 2016

AUD/USD

AUD/USD May 18 at 9:50 EDT

Open: 0.7221 Low: 0.7189 High: 0.7235 Close: 0.7189

AUD/USD Technicals

S3S2S1R1R2R30.69160.70490.71600.72510.73390.7472
  • AUD/USD posted losses in the Asian session. The pair was choppy in the European session and remains under pressure in North American trade.
  • 0.7160 is under strong pressure in support following sharp losses by AUD/USD in the Wednesday session
  • There is resistance at 0.7251
  • Current range: 0.7160 to 0.7251

Further levels in both directions:

  • Below: 0.7160, 0.7049 and 0.6916
  • Above: 0.7251, 0.7339, 0.7472 and 0.7560

OANDA’s Open Positions Ratio

AUD/USD ratio is showing little movement on Thursday. Long positions have a strong majority (59%), indicative of trader bias towards AUD/USD reversing directions and moving higher.

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