FUNDAMENTAL
OVERVIEW
USD:
The US dollar weakened across the board on Friday following a softer than expected
NFP report, with the headline showing negative payroll growth and average
hourly earnings missing forecasts by a notable margin.
The data triggered a dovish repricing in interest rate expectations, with
the probability of a September rate hike falling to 38%, compared with 54%
before the release. Market pricing has normalised since then, with the
probability of a September hike rising back to 48%.
The reason for this whipsaw in expectations is that there was a significant
loss of government jobs, which made the report look much softer than it
actually was. The unemployment rate painted a different picture, falling
further to 4.1%. Overall, the labour market remains on a better trajectory than
it has been over the past three years.
The next major event will be the US CPI report on Wednesday. The data will
be critical for the September FOMC decision and the Jackson Hole Symposium.
A hot report will likely trigger a rally in the US dollar, with traders increasing
rate hike bets. A soft report, on the other hand, should reduce further the
risk of Fed tightening and put more pressure on the greenback
AUD:
On the AUD side, the RBA is
expected to keep the Cash Rate unchanged tomorrow at 4.35% following a series
of soft economic data. In fact, the labour market has eased faster than
expected and the Q2 CPI came lower than RBA’s forecasts. At this meeting, the
RBA will also release the updated SMP where unemployment is expected to be revised
higher, while inflation lower.
The focus will likely be on
the last paragraph of the Board’s statement where in June it said “monetary
policy is well placed to respond to developments and the Board is focused on
its mandate to deliver price stability and full employment. It will do what it
considers necessary to achieve that outcome, including increasing the cash rate
target further if required. Today’s policy decision was unanimous”.
The consensus is for the Board
to keep it unchanged maintaining the hawkish bias. A removal of “including
increasing the cash rate target further if required” would be taken as a dovish
surprise. The attention will then shift to the press conference for potential
policy signals from RBA Governor Bullock.
AUDUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that AUDUSDis trading near the key
resistance zone around the 0.7085 level. That’s where we can expect the sellers
to step in with a defined risk above the resistance to position for a drop into
the 0.6835 level. The buyers, on the other hand, will want to see the price
breaking higher to increase the bullish bets into the 0.72 handle next.
AUDUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, the price
action into the resistance looks to be forming a rising wedge. This is generally
a reversal pattern with the base of the wedge as the first target. The sellers
will want to see the price breaking below the bottom trendline to increase the
bearish bets into new lows, while the buyers will continue to lean on the
trendline with a defined risk below it to keep pushing into new highs.
AUDUSD TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as the sellers will look for opportunities around the
resistance and on the break of the bottom trendline, while the buyers will be
leaning on the trendline to keep targeting new highs or wait for a break above
the resistance. The red lines define average daily range for today.
UPCOMING CATALYSTS
Tomorrow, we have the RBA
rate decision. On Wednesday, we have the US CPI report. On Thursday, we get the
US PPI data and the latest US Jobless Claims figures. On Friday, we conclude
the week with the US Retail Sales and the University of Michigan Consumer Sentiment
report.
This article was written by Giuseppe Dellamotta at investinglive.com.
