AUD/USD ANALYSIS & TALKING POINTS
- US debt ceiling optimism has not been enough to back the AUD as Fed speakers maintain their aggressive stance on monetary policy.
- Australian and Chinese manufacturing PMI data limiting Aussie downside.
- US jobs and PMI data in focus.
- Bear flag break seeks further confirmation.
AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP
The Australian dollar had a rollercoaster yesterday fluctuating around the 0.6500 handle after the US debt ceiling legislation was passed through the House. Both Republicans and Democrats joined forces to push the deal with a 314-117 split. The deal now heads over to the Senate where support is almost guaranteed. This optimism favored risk sentiment while Fed officials forced the doviish narrative once more leaving the USD on offer.
Thursday morning had some favorable data in store for the Aussie dollar with manufacturing PMI for both Australia and China (key importer of Australian commodities) beat estimates (see economic calendar below). Although NBS manufacturing PMI missed yesterday, the Caixin report is said to provide a more reliable private sector measure which markets have since backed. Commodity prices YoY have also shown less decline than forecasted, yet another positive for AUD.
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AUD ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX economic calendar
From a USD perspective, the economic calendar contains vital jobs data as well as ISM manufacturing PMI. Both are considered leading indicators and could provide valuable insight ahead of tomorrow’s Non-Farm Payroll (NFP) report. Poorer labor statistics coupled with a declining manufacturing sector could hint at a lower NFP figure for tomorrow although recent history shows the ADP print being far from a reliable NFP gauge.
US ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX economic calendar
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TECHNICAL ANALYSIS
AUD/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Daily AUD/USD price action remains targeted around the recent bear flag breakout as mentioned in my previous analyst pick. Although bears have pushed below flag support, the pair remains buoyed at the 0.6500 psychological level. A daily candle confirmation close could really launch a selloff towards subsequent support zones. US labor data will be the likely catalyst for a confirmation of the above or an AUD rally.
Key resistance levels:
- 0.6620
- 0.6565
Key support levels:
- 0.6500
- 0.6387
IG CLIENT SENTIMENT DATA: BULLISH
IGCS shows retail traders are currently LONG on AUD/USD, with 77% of traders currently holding long positions. At DailyFX we typically take a contrarian view to crowd sentiment resulting but due to recent changes in long and short positioning, we arrive at a short-term upside disposition.
Contact and followWarrenon Twitter:@WVenketas
