Aussie flat ahead of job reports

The Australian dollar is in a holding pattern in Wednesday trading. Currently, AUD/USD is trading at 0.7356, down 0.10% on the day.

AUD eyes inflation, job data

The Australian dollar is treading in calm waters, but that could change later in the day, with the release of key numbers out of Australia and the US. First, the US releases inflation for September. Inflation fears are getting stronger, as CPI has hit a 30-year high. In August, headline CPI came in at 5.3% and core CPI at 4.0 (YoY).

Fed Chair Jerome Powell has long maintained that inflation is transitory, but unless inflation starts to ease soon, the markets will remain somewhat skeptical about this stance. If the September CPI numbers are a repeat or even higher than the August releases, I expect the US dollar to respond with gains.

Another highlight on today’s calendar is the Australian employment report. The August numbers were dismal, as the economy shed 140 thousand jobs, dashing expectations of around -80 thousand. If we don’t see a marked improvement in the today’s report, then the Aussie could take a dip.

Despite the prolonged lockdowns in Sydney and Melbourne, confidence remains high for both consumers and business. Westpac Consumer Consumer Sentiment fell to 104.6, down from 106.2 beforehand. Even with the drop, the reading points to a relatively high level of confidence. On the business side, The NAB Business Confidence report bounced back in impressive form in September, after two successive declines. The index accelerated to 13, up sharply from -6 points. The solid numbers can be attributed to the government’s plans to reopen and ease restrictions. As well, business confidence has been lifted by strong commodity prices, which have bolstered the country’s export sector.

Australia’s business sector is showing renewed optimism about the economy. The strong gain was driven by improved confidence after the states of New South Wales and Victoria announced reopening plans, as well as an increase in vaccination rates. As well, the surge in commodity prices has boosted the export sector and improved business confidence.

AUD/USD technical

• The resistance line of 0.7356 is fluid. Next, there is resistance at 0.7403.

• The pair has support at 0.7244.  Below, there is support at 0.7179.