Matt Simpson, CFTe, MSTA
CityIndex
With the USD the best performing G10 currency this week the markets await important US data from G2 GDP, FOMC meetings and Nonfarm payroll to see if it can extend its bullish reach.
The Greenback has continued the bullish sentiment of the previous 2 weeks, breaking to 6-month highs as consumer sentiment came in its highest since October 2007. With the USD the best performing G10 currency this week the markets await important US data from G2 GDP, FOMC meetings and Nonfarm payroll to see if it can extend its bullish reach.
If tonight's GDP comes in at 3% or above then this would more than erase Q1 contraction of -2.9%, and help the Greenback remain support at the highs. Whether it will extend its bullish reach further is up for debate, as I do not think this will put pressure on the FED to raise rates sooner. Traders would do well to remember that the FED's preferred measurement of inflation is PCE (personal consumption expenditure) which is 1.8% y/y. below the FED's 2% target, and released this Friday along with employment data.
Whilst A$ continues to meander around 94c the fact it is managing to hold ground whilst the Greenback is a testament to A$ strength. Whilst we now trade back below 94c it should be noted that the decline has been achieved on declining volume (which suggests a lack of sellers) and price has now stalled above the 50-day MA (moving average) and monthly pivot support.
I expect to remain around current levels as the markets quietly await tonight's GDP data.
Technical support is around 0.9365 and holding above its 50-day average. If US GDP falls below target and this is accompanied by further hesitancy from the FED in regards to interest rates then this should help A$ stay above 0.9365 support and break above 94c again. Then the question becomes "can it stay above this level" for more than a couple of sessions.
However if GDP comes in or above 3% and we see a Hawkish statement from FOMC then we could see A$ break below key support of 0.9368 and target 0.935
After tonight the markets will then focus on China PMI, Australian Commodity prices and of course the data-dump from the US on Friday. With Nonfarm payroll and PCE being released together if the data combined all leans towards a more bullish or bearish bias for USD then we should see an end to the current deadlock between AUD and USD.
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