The firm reading from the ADP Jobs data which arrived ahead of tomorrow’s NFP reading added to comments from Janet Yellen, who indicated in her testimony to Congress that a December rate hike, while not a certainty, is still very much on the table, sent the dollar higher and stocks lower today. While the coming session only has some secondary US data due (Jobless Claims) ahead of tomorrow’s US Employment outcome, it may be a more rangebound session although there are speeches coming up from the Fed’s Fischer and Dudley to look out for. Elsewhere the main event of the day will be the BOE Meeting and the monthly UK Interest Rate Decision – no change expected. In Asia, RBA Governors Stevens and Lowe will be speaking shortly. Later on, the BOJ Minutes will be released, and then from the EU we get the German Factory Orders, EU Bulletin/Economic Growth Forecast and the EU Retail Sales.
Yesterday’s good result from the Caixin Chinese Services PMI gave the Aud a boost in Asian trade, taking it back above 0.7200, with demand for the carry trade also adding to the bid tone following the RBA decision not to cut rates. This enthusiasm saw a run to 0.7223, but since when it has been all downhill through Europe and the US, and since the comments from Janet Yellen it now trades back at 0.7145.
Speeches from the RBAs Stevens/Lowe are coming up shortly, but in the absence of any local data expect a more rangebound session, probably running into to tomorrow as well, while waiting for the US Jobs data.
Given that the daily indicators are flat a cautious stance is required, but it appears that we are in for more medium term choppy trade for the Aud. In the meantime though, the shorter term indicators look negative, suggesting a possible move towards Wednesday’s spike low towards 0.7110 could be in store.
Further out, if/when the Aud heads back below 0.7100, then 0.7080 (minor) and 0.7065 (29 Oct low) would be supportive. Below this, we should look for further support to be tested at 0.7040 (76.4% of 0.6936/0.7381), at 0.7012 (76.4% of 0.6900/0.7381) and then at 0.7000. Beyond that, the rising trend support now sits at 0.6995, a break of which will return to 0.6936 (29 Sept low) and to 0.6900 (4 Sept low).
If we do see a topside squeeze, look for sellers to gather at 0.7165 (200 HMA) ahead of 0.7180 and 0.7200. Beyond here looks unlikely at this stage and the session high of 0.7223 looks rather distant. If wrong, back above here would then head towards 0.7260/70 (0.7260: 61.8% of 0.7381/0.7066) and possibly towards 0.7295/0.7300 (23 Oct high: 0.7296/descending trend resistance). Beyond there, 0.7306 is 76.4% of 0.7381/0.7066
As I said before, a range of 0.7000/0.7300 heading into December would not really surprise, although a RBA rate cut (Dec 3) and/or a Fed rate hike (Dec 15) would alter that theory and send the Aud lower.
Note that RBA Governor, Stevens and deputy Governor, Lowe will be speaking shortly
Economic data highlights will include:
RBA Speeches Stevens/Lowe.
Jim Langlands
FX Charts
