The Australian dollar has posted gains on Wednesday, as the pair trades at 0.7270. The currency moved higher as Australian GDP climbed 1.1%, well above expectations. Later in the day, Australia releases two major indicators – Retail Sales and Trade Balance. In the US, today’s key indicator is a key manufacturing indicator, ISM Manufacturing PMI. The markets are expecting a weak reading of 50.5 in the April report. On Thursday, the US releases two key employment indicators – ADP Nonfarm Payrolls and Unemployment Claims.
The Aussie has enjoyed a strong week, gaining about 100 points. Australian GDP in the fourth quarter was unexpectedly strong at 1.1%, well above the estimate of 0.6%. GDP was boosted by a strong increase in exports to China and higher consumer spending. This marked the strongest GDP report since 2014, and could dampen expectations about another rate cut from the RBA, which will hold its policy meeting next week. The central bank surprised the markets with a rate cut in May, lowering rates from 2.00% to 1.75%. The central bank has sent broad hints that it will continue cutting rates, although it may choose to wait until after the Australian election in July.
Only a few weeks ago, a rate hike in the US was considered very unlikely. However, recent comments by Federal Reserve chair Janet Yellen and other Fed policymakers have strongly hinted that a rate hike is on the table this summer. On Friday, Yellen said that if the US economy continued to improve, a rate hike would be appropriate in the “coming months”. This was followed by St. Louis Reserve President James Bullard, who said on Monday that global markets were “well prepared” for a summer interest rate rise, although he didn’t provide any specific dates. Odds of a rate hike in June have increased, but the Fed will be hard-pressed to raise rates if key indicators don’t show improvement, particularly inflation numbers. According to CME Group (NASDAQ:CME), traders have priced in a June rate hike at 28%, 60% for July and 68% in September. Market sentiment has strongly shifted toward the Fed raising rates, and this could boost the US dollar against its rivals.
AUD/USD Fundamentals
Tuesday (May 31)
- 21:30 Australian GDP. Estimate 0.6%. Actual 1.1%
Wednesday (June 1)
- 2:30 Australian Commodity Prices. Estimate -10.0%
- 9:45 US Final Manufacturing PMI. Estimate 50.5
- 10:00 US ISM Manufacturing PMI. Estimate 50.5
- 10:00 US Construction Spending. Estimate 0.5%
- 10:00 US ISM Manufacturing Prices. Estimate 58.0
- All Day – US Total Vehicle Sales. Estimate 17.2M
- 14:00 US Beige Book
- 21:30 Australian Retail Sales. Estimate 0.3%
- 21:30 Australian Trade Balance. Estimate -2.11B
Upcoming Key Events
Thursday (June 2)
- All Day – OPEC Meetings
- 8:15 US ADP Nonfarm Employment Change. Estimate 177K
- 8:30 US Unemployment Claims. Estimate 270K
*Key releases are highlighted in bold
*All release times are EDT
AUD/USD for Wednesday, June 1, 2016
AUD/USD June 1 at 8:40 EDT
Open: 0.7235 Low: 0.7227 High: 0.7299 Close: 0.7268
AUD/USD Technicals
| S3 | S2 | S1 | R1 | R2 | R3 |
| 0.7049 | 0.7160 | 0.7251 | 0.7339 | 0.7472 | 0.7612 |
- AUD/USD posted gains in the Asian session and has been choppy in European trade
- 0.7251 has switched to a support role following gains by AUD/USD. It is a weak line
- There is resistance at 0.7339
- Current range: 0.7251 to 0.7339
Further levels in both directions:
- Below: 0.7251, 0.7160, 0.7049 and 0.6916
- Above: 0.7339, 0.7472 and 0.7612
OANDA’s Open Positions Ratio
AUD/USD ratio has showed movement towards long positions on Wednesday. Long positions have a strong majority (68%), indicative of trader bias towards AUD/USD continuing to move higher.