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Aussie Dollar May Rise as Yen Retreats in BOE, NFP Pregame

Aussie Dollar May Rise as Yen Retreats in BOE, NFP Pregame

Talking Points:

  • Aussie Dollar declines, Yen gains as Asia follows Wall Street risk-off lead
  • Sentiment may firm if UK, US news-flow bolster dovish Fed and BOE bets
  • Pre-positioning for BOE rate decision, NFP data may boost risk appetite

The return of risk aversion carried over from US hours and into Asian trade. The sentiment-linked Australian and Canadian Dollars are underperforming, with prices tracking steep declines across regional stock exchanges. The anti-risk Japanese Yen is trading broadly higher.

The New Zealand Dollar has managed to diverge, registering modest gains following a better-than-expected set of fourth-quarter employment figures. The jobless rate unexpectedly fell to a seven-year low of 5.3 percent. The Kiwi rose alongside front-end bond yields, hinting the upbeat data release weighed against RBNZ rate cut speculation.

Looking ahead, UK PMI figures and the US ADP employment report are in focus. Both releases are likely to be analyzed through the prism of monetary policy expectations ahead of the BOE rate decision on Thursday and the official set of US jobs figures on Friday. Soft results that fuel hopes for delayed stimulus withdrawal are likely to boost risk appetite, trimming losses in commodity FX and capping Yen gains. Alternatively, upbeat numbers may amplify risk-off momentum.

Portfolio readjustment may be another potent catalyst for a recovery in risk appetite. Traders are unlikely to want to carry aggressive directional exposure into high-profile event risk in the final 48 hours of the trading week. This means that a move to rebalance toward neutral after yesterday’s aggressive risk-off push pay fuel a rebound in sentiment-geared assets.

DailyFX analysts expected the selloff in early 2016. See our forecasts to find out what is likely next!

Asia Session

21:45NZDUnemployment Rate (4Q)5.3%6.1%6.0%
21:45NZDEmployment Change (QoQ) (4Q)0.9%0.8%-0.5%
21:45NZDEmployment Change (YoY) (4Q)1.3%1.1%1.5%
21:45NZDParticipation Rate (4Q)68.4%68.9%68.7%
21:45NZDPvt Wages Ex Overtime (QoQ) (4Q)0.4%0.5%0.4%
21:45NZDPvt Wages Inc Overtime (QoQ) (4Q)0.4%0.5%0.4%
21:45NZDAverage Hourly Earnings (QoQ) (4Q)0.2%0.5%0.9%
22:30AUDAiG Perf of Services Index (JAN)48.4-46.3
00:00NZDRBNZ’s Wheeler Speaks in Christchurch ---
00:01GBPBRC Shop Price Index (YoY) (JAN)-1.8%--2.0%
00:30AUDTrade Balance (DEC)-3535m-2450m-2727m
00:30AUDBuilding Approvals (MoM) (DEC)9.2%4.5%-12.4%
00:30AUDBuilding Approvals (YoY) (DEC)-2.5%-7.2%-7.6%
01:45CNHCaixin China PMI Services (JAN)52.4-50.2
01:45CNHCaixin China PMI Composite (JAN)50.1-49.4
02:00JPYNikkei Japan PMI Services (JAN)52.4-51.5
02:00JPYNikkei Japan PMI Composite (JAN)52.6-52.2
02:30JPYBOJ Kuroda speaks in Tokyo ---
05:00JPYConsumer Confidence Index (JAN)42.542.542.7

European Session

08:45EURMarkit/ADACI Italy Composite PMI (JAN)-56.0Low
08:45EURMarkit/ADACI Italy Services PMI (JAN)54.055.3Low
08:50EURMarkit France Services PMI (JAN F) 50.650.6Low
08:50EURMarkit France Composite PMI (JAN F) 50.550.5Low
08:55EURMarkit Germany Services PMI (JAN F) 55.455.4Medium
08:55EURMarkit/BME Germany Composite PMI (JAN F) 54.554.5Medium
09:00EURMarkit Eurozone Services PMI (JAN F) 53.653.6Medium
09:00EURMarkit Eurozone Composite PMI (JAN F) 53.553.5Medium
09:30GBPOfficial Reserves Changes ($) (JAN)-527mLow
09:30GBPMarkit/CIPS UK Services PMI (JAN)55.455.5Medium
09:30GBPMarkit/CIPS UK Composite PMI (JAN)55.055.3Medium
10:00EUREurozone Retail Sales (MoM) (DEC)0.3%-0.3%Low
10:00EUREurozone Retail Sales (YoY) (DEC)1.5%1.4%Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.