The Australian dollar is showing limited movement on Monday, following considerable gains on Friday. AUD/USD is trading at 0.7540 in the North American session. On the release front, Australian Home Loans continues to alternate between gains and declines, and came in at -1.0% in May. This beat the forecast of -1.9 percent. Later in the day, Australia releases NAB Business Confidence. In the US, it’s a quiet day with just one minor release on the schedule, the Labor Market Conditions Index. As well FOMC Esther George will speak at an event in Missouri.
The election saga in Australia appears to be over. The vote was unusually close and the country was in political limbo for over a week. However, on Sunday, Prime Minister Malcolm Turnbull declared victory and should be able to form a narrow majority. Turnbull won’t have much time to celebrate, as the new government will have to win over skeptical international credit agencies. The election uncertainty took its toll last week, as Standard & Poor’s downgraded the outlook on Australia’s AAA credit rating from stable to negative. The credit agency cited lingering uncertainty over the inconclusive Australian election, and warned that the country’s credit rating was in jeopardy if Australia didn’t get its fiscal house in order. On Monday, Moody’s credit agency weighed in as well, stating that it “expects fiscal consolidation to remain a key policy objective of the government”. We’ll get a look at NAB Business Confidence later on Monday, a barometer of the mood of the business sector. A strong reading could push the Australian dollar higher.
US employment numbers were generally positive on Friday, led by the key Nonfarm Employment Change report. The indicator surged to 287 thousand in June, crushing the estimate of 175 thousand. This followed a dismal reading of 37 thousand a month earlier. There was further encouraging news as the work participation rate improved, following two straight declines. At the same time, Average Hourly Earnings remains weak, as the wage growth indicator posted a weak gain of 0.1%, shy of the forecast of 0.2%. The unemployment rate rose to 4.9%, above the estimate of 4.8%. The employment picture remains bright, but weak wage growth continues to be the Achilles heel of the US labor market.
There were no surprises in the Federal Reserve minutes, released last week. In the June policy meeting, policymakers expressed concerns about a slowdown and hiring and the health of the US economy, and the underlying tone was one of prudence and caution. The June meeting took place just one week before the Brexit referendum vote, and in the minutes showed that Fed policymakers adopted a “wait and see” attitude about Brexit. The vote by Britain to leave the EU stunned the markets, causing turmoil in the markets and sending bond yields to record lows. The minutes indicated that Fed members projected two rate increases before the end of the year, but that forecast is likely out-of-date following the shock waves from the Brexit earthquake. Given the current economic climate, the markets are pessimistic about any rates moves before 2017. Investors have priced in no chance of a rate increase at the next Fed meeting on July 26-27, and just an eight percent chance of a hike in 2016. However, if US employment and inflation numbers improve in the second half of the year, the likelihood of a rate hike will certainly increase.
AUD/USD Fundamentals
Sunday (July 10)
- 21:30 Australian Home Loans. Estimate -1.9%. Actual -1.0%
Monday (July 11)
- 10:00 US FOMC Member Esther George Speaks
- 10:00 US Labor Market Conditions Index
- 21:30 Australian NAB Business Confidence
*Key releases are highlighted in bold
*All release times are EDT
AUD/USD for Monday, July 11, 2016
AUD/USD July 11 at 9:45 EDT
Open: 0.7557 Low: 0.7532 High: 0.7575 Close: 0.7542
AUD/USD Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 0.7251 | 0.7339 | 0.7472 | 0.7612 | 0.7739 | 0.7835 |
- AUD/USD showed little movement in the Asian session and has been choppy in the European session. The pair has lost ground in the North American session
- 0.7472 is providing support
- There is resistance at 0.7612
- Current range: 0.7472 to 0.7612
Further levels in both directions:
- Below: 0.7472, 0.7339, 0.7251 and 0.7160
- Above: 0.7612, 0.7739 and 0.7835
OANDA’s Open Positions Ratio
AUD/USD ratio is showing little movement on Monday, consistent with the lack of significant movement from AUD/USD. Long and short positions are an even split, indicative of a lack of trader bias as to what direction AUD/USD will take next.