The Australian dollar has posted considerable losses on Monday, as AUD/USD trades just above the 0.72 line early in the European session. After a quiet Christmas week, the markets are back in action. Taking a look at Monday’s schedule, Australian Commodity Prices continues to sink, and posted a sharp decline of 23.3% in December. The Chinese Caixin Manufacturing PMI slipped to 48.2 points, short of expectations. Over in the US, today’s key event is ISM Manufacturing PMI, with an estimate of 49.1 points.
The Aussie is sensitive to key Chinese numbers, as the Asian giant is Australia’s number one trading partner. AUD/USD has slipped on Monday following a disappointing reading from Chinese Caixin Manufacturing PMI. The key indicator slipped to 48.2 points in December, short of the forecast of 48.9 points. The index managed to break above the 50-point level only once in 2015, pointing to ongoing contraction in the Chinese manufacturing sector. Meanwhile, Australian Commodity Prices continues to post sharp declines, and slipped 23.3% in December. These figures underscore decreased Chinese demand for Australian exports, which has hurt the Australian economy and weakened the commodity-based Australian dollar.
The Australian economy has not looked very sharp recently, but despite this the Australian dollar has enjoyed a strong fourth quarter. AUD/USD started the month of October at the symbolic 70 level, and has gained about 200 points, as it is currently trading above the 0.72 line. The Aussie has continued to head higher even after the Federal Reserve rate hike earlier this month, which has bolstered the greenback at the expense of other commodity-based currencies such as the Canadian dollar. Still, the recent rate hike is expected to be the first in a series of incremental rate hikes over the course of 2016, and higher interest rates means that the US dollar will become even more attractive to investors, which could hurt the Australian dollar.
The US economy has shown strong improvement, but signs of weakness remain, such as the housing sector. Last week, Pending Home Sales was unexpectedly soft, posting a decline of 0.9%, compared to an estimate of a 0.6% gain. Recent housing indicators have also fallen below expectations. Meanwhile, CB Consumer Confidence sparkled in the December report, as the key indicator jumped to 96.5 points, up sharply from 90.4 points a month earlier. This easily beat the estimate of 93.9 points. This excellent reading followed a solid UoM Consumer Sentiment, which improved to 92.6 points, above the forecast of 92.1 points and marking a 4-month high. Consumer confidence indicators are closely monitored by analysts, as stronger consumer confidence often translates into increased consumer spending, a key driver of economic growth. Strong consumer demand has been an important factor in the strength of the US economy, which led to the historic rate hike by the Federal Reserve in December.
AUD/USD Fundamentals
Monday (Jan. 4)
- 5:30 Australian Commodity Prices. Actual -23.3%
- 14:45 US Final Manufacturing PMI. Estimate 51.1 points.
- 15:00 US ISM Manufacturing PMI. Estimate 49.1 points
- 15:00 US Construction Spending. Estimate 0.7%
- 15:00 US ISM Manufacturing Prices. Estimate 36.5 points
*Key releases are highlighted in bold
*All release times are GMT
AUD/USD for Monday, January 4, 2015
AUD/USD January 4 at 11:35 GMT
AUD/USD 0.7205 H: 07289 L: 0.7198
AUD/USD Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 0.6931 | 0.7063 | 0.7100 | 0.7213 | 0.7349 | 0.7440 |
- AUD/USD posted sharp gains in the Asian session. The pair is steady in European trade
- 0.7213 has switched to a resistance role as the pair has lost ground
- The round number of 0.7100 is providing support
- Current range: 0.7100 to 0.7213
Further levels in both directions:
- Below: 0.7100, 0.7063 and 0.6931
- Above: 0.7213, 0.7349, 0.7440 and 0.7526
OANDA’s Open Positions Ratio
AUD/USD ratio is evenly split between long and short positions, indicative of a lack of trader bias as to what direction the pair will take next.