AUD/USD: All eyes on commodities, FOMC minutes, Aussie jobs and critical levels in US stocks

• AUD/USD awaits key Aussie jobs data and FOMC minutes.
• AUD/USD is currently trading at 0.7164 from a low of 0.7141 and having printed a high of 0.7176.

AUD/USD is moving along in a 20-degree upside drifting channel est. since 0.7053 lows having made a recent high of 0.7176 on Tuesday, (as the dollar caved in across the board, printing a fresh low in the DXY of 96.43 from it has made a feeble correction back to 96.65). 

The Aussie was hurt on the slight wages miss in Tokyo with the Dec quarter's wage price index rising +0.5%/q and 2.3%/y (mkt: +0.6%/q, 2.3%/y). "Headline growth may have stalled at 2.3%/y, but wages including bonuses jumped again from 2.7% to 2.8%/y, which implies workers are rewarded with bonuses rather than pay rises in the past year. Skilled vacancies +1.3%/m in Jan after an upwardly revised +1.4%/m prior. This series is more optimistic than ANZ vacancies," analysts at TD Securities explained. 

Commodities on the rise as trade cut-off date verbally softened - supporting AUD

However, the broader sense of the current picture is one of recovery for the commodity sector which is lending support to the Aussie. Fundamentally, while an agreement is likely a long shot from these initial trade talk meetings, the market is of the mind that a solution will be achieved to China's and the US's trade dispute and an extension will be made to the March 1st deadline (which Trump called out yesterday saying "it is not a magical number"). For that matter, the likes of oil , copper & iron have all recovered and significantly so. 

However, it is all a little daunting at this juncture. Stocks have hit a four-month high, Gold is at a 10 month high and bonds are bid, which does not add up and should be a warning to the bulls. The stock markets are banking on a trade deal and the Fed to hold, possibly even cut rates in December with futures market pricing in a 10% chance of it. However, there is equally a great deal of uncertainty with stocks drifting sideways at the highs (a possible 5 wave resistance level) and US yields also moving sideways. 

FOMC minutes are key for risk assets today

Today's FOMC minutes could well be pivotal and anything less than a dovish bias would be a disappointment to the markets and risk sentiment which could ultimately damage the Aussie if it all comes crashing down. Such an outcome would potentially give the greenback a much-needed lifeline at this juncture as the trend keeps heading lower. On the other hand, if the Fed minutes are dovish, (i.e. a mention of QT being brought forward), and more so than the neutral tones we have got from the likes of Mester and Williams this week, then stocks will surely rally, the dollar will fall and hopes of a trade deal will seal the deal for commodity prices, supporting the Aussie along in its northerly corrective trajectory. However, considering the run of poor data and dovish sentiment in the RBA, today's jobs data will be critical and any spikes will likely be shortlived leading into the event. 

Aussie jobs data next key event

Analysts at TD Securities explained that January is seasonally a weak month for employment as seasonal jobs are no longer required,(but this is adequately captured by the seasonal adjustment process):

"We look for +20k jobs for January, and with an unchanged participation rate of 65.6% leaves the unemployment rate at 5.0% (mkt +15k and +5.0%). An average monthly addition of +20k/m leaves the unemployment rate steady at 5%, which is the RBA’s expectation. The Bank's downside risks will be exacerbated if the unemployment rate starts to creep towards 6% again".

AUD/USD levels

AUD/USD continues to attempt to stabilise and recover, analysts at Commerzbank noted, as the price based last week slightly ahead of their near term target at the 0.7022/15 October low and 50% retracement:

"Cloud support comes in at 0.7066. Rallies have closed above the 55 day ma at 0.7141 and this should be enough to reassert upside pressure to the 200 day ma at 0.7267 and the 0.7295 January high. Price action in January was exhaustive – the market charted a hammer (reversal). We have a TD perfected setup on the daily chart and a 13 count on the weekly chart. This suggests the down move ended at 0.6738."