US equities have rallied strongly today, up by around 3.5%, reducing market concerns of a major downturn in economic growth after some Fed comments reduced the prospect of a September rate hike, despite a session’s stellar Durable Goods Orders. The US$ rebounded against most of its counterparts and the squeeze of long positions seen earlier in the week now appears to be receding. Today will again be busy, focusing initially on China, which could yet send markets into reverse if the Shanghai market has another major spill, with the lack of any rally following the cut in the RRR being a major worry. Beyond China, we have the US Q2 GDP and Core Personal Consumption/Expenditure (both Provisional), Jobless Claims, Pending Home Sales and Kansas Fed Mfg Activity to look forward to. The Jackson Hole Symposium also begins today, so watch fro soundbites coming from that. Ahead of that, Australia gets to see the Q2 Capex, but there is little else from either Asia or Europe.
The AUD is currently pretty much unchanged from yesterday, unable to take advantage of the diminishing concerns over global growth and remains rangebound at levels close to 0.7100. The strong US Durable Goods Orders did not really help the cause of the Aud as the prospect of a September Fed rate rise again took hold, despite Dudley’s comments suggesting otherwise.
On the whole, the direction for the Aud does appear to be headed lower whatever the Fed decides to do with rates. If a September hike looks increasingly likely, then the US$ will rally. No hike would then allow the RBA to consider another easing, albeit probably not at next week’s meeting, which in turn would place the Aud under pressure of its own.
For now, the technicals remain pretty much unchanged and the downside will find buyers at 0.7100, below which would open the path to the session low at 0.7070 and then to the trend low at 0.7037. Below this would see a run to 0.7000 and lower, where the next support would arrive at 0.6952 (April 2009 low) but seems unlikely to be seen yet.
Rallies will see sellers at around 0.7170 and at 0.7200 (both minor) ahead of 0.7250. A break of this would encounter further offers at 0.7300/10 but currently looks unlikely.
Note the minor bullish divergence appearing on the hourly charts which could yet prove supportive and bring about a minor squeeze higher.
Economic data highlights will include:
Jim LanglandsFX Charts
