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Australian Dollar May Continue Lower if US Data Fuels Risk Aversion

Australian Dollar May Continue Lower if US Data Fuels Risk Aversion

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar Aims to Extend Gains as Data Fuels Fed Tightening Speculation
  • Australian Dollar Underperformed Amid Risk Aversion in Overnight Trade
  • See Economic Releases Directly on Your Charts with the DailyFX News App

A quiet economic calendar in European trading hours is likely to see traders looking ahead to US news-flow. Retail Sales are expected to have added 0.6 percent in August, marking the largest increase in four months. Meanwhile, the University of Michigan Consumer Confidence gauge is forecast to show the strongest sentiment reading since April.

The trend in US economic data in the weeks leading up to Augusts’ disappointing jobs report was decidedly rosy. Chatter around the news-wires was dismissive of the soft payrolls outcome, chalking it up to a flukethat would be revised away in subsequent releases rather than a real turning point for US economic performance.

If that narrative finds support in upbeat results on today’s outcomes, that may fuel bets on a relatively sooner onset of policy tightening from the Federal Reserve. This has potential to undermine risk appetite considering the formative role of Fed stimulus in elevating sentiment in recent years. Such a scenario is likely to generate gains for the US Dollar while applying particularly strong selling pressure to commodity-bloc currencies.

The Australian Dollar underperformed in overnight trade, sliding as much as 0.5 percent on average against its leading counterparts. Risk aversion appeared to be the driving catalyst behind the move. The MSCI Asia Pacific regional benchmark stock index traded lower and S&P 500 futures faced selling pressure, eroding demand for the sentiment-sensitive Australian unit. We remain short AUDUSD.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

22:30

NZD

Business NZ Perf of Mfg Index (AUG)

56.5

-

53.5

22:45

NZD

Food Prices (MoM) (AUG)

0.3%

-

-0.7%

23:13

NZD

REINZ House Price Index (MoM) (AUG)

1.1%

-

-0.7%

23:13

NZD

REINZ House Sales (YoY) (AUG)

-16.3%

-

-13.0%

1:30

AUD

Credit Card Balances (A$) (JUL)

49.4B

-

49.9B

1:30

AUD

Credit Card Purchases (A$)(JUL)

23.4B

-

23.1B

2:02

CNY

New Yuan Loans (AUG)

702.5B

700.0B

385.2B

2:02

CNY

Aggregate Financing (RMB) (AUG)

957.4B

1135.0B

273.1B

2:02

CNY

Money Supply M2 (YoY) (AUG)

12.8%

13.5%

13.5%

4:30

JPY

Industrial Production (MoM) (JUL F)

0.4%

-

0.2%

4:30

JPY

Industrial Production (YoY) (JUL F)

-0.7%

-

-0.9%

4:30

JPY

Capacity Utilization (MoM) (JUL)

-0.8%

-

-3.3%

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:00

EUR

German Wholesale Price Index (MoM) (AUG)

-0.2% (A)

0.1%

Medium

6:00

EUR

German Wholesale Price Index (YoY) (AUG)

-0.6% (A)

0.5%

Medium

8:30

GBP

Construction Output SA (YoY) (JUL)

3.2%

5.3%

Low

8:30

GBP

Construction Output SA (MoM) (JUL)

0.6%

1.2%

Low

9:00

EUR

Eurozone Industrial Production (MoM) (JUL)

0.7%

-0.3%

Low

9:00

EUR

Eurozone Industrial Production (YoY) (JUL)

1.4%

0.0%

Low

9:00

EUR

Eurozone Employment (QoQ) (2Q)

-

0.1%

Low

9:00

EUR

Eurozone Employment (YoY) (2Q)

-

0.2%

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.2815

1.2870

1.2897

1.2925

1.2952

1.2980

1.3035

GBPUSD

1.6067

1.6152

1.6204

1.6237

1.6289

1.6322

1.6407

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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