AUD/USD correction running out of legs, eyes on positioning data, Fed and Sep RBA

• AUD/USD corrects on solid jobs data, no committed bulls bail-out.
• RBA, Fed and trade wars to be watched over coming weeks, as well as positioning in the greenback. 

AUD/USD is currently trading at 0.6781, higher by 0.51% on the day having travelled from a low of 0.6745  to a high of 0.6790. The Aussie got a slight boost from the jobs report yesterday, travelling 0.50% over the course of the Asian session before moving into a 0.37% chop as bulls remain vigilant and stay long Aussie with plenty of caution while the not so committed bulls took profits. 

RBA's Debelle spoke overnight, which was a useful lead into the jobs data as it showed how focussed the RBA is on the jobs market. Indeed, after a relatively upbeat tone in his commentary on the Australian economy and wonder risks associated with the overseas activity, he concluded that a soft labour market is a key risk in the near term.

Therefore, the Aussie was able to catch a bid overnight following the jobs report for July that surprised to the upside on most metrics. First of all, the 41.1k rise in jobs in July beat the +14k mkt forecast with the bulk of the jobs coming from full-time +34.5k. However, the unemployment rate remained at 5.2%,  but the participation rate also hit a fresh record to 66.1%.

"The only negative from the report was the uptick in the underemployment rate, from 8.2% to 8.4%, pointing to a pick up in spare capacity, which is likely to drive a further 25bps cut by year-end," analysts at TD Securities argued. 

On the whole, the RBA is expected to ease rates later this year, but the jobs data likely means they ill not be pushed too hard to cut as soon as September. Analysts at Nation Bank of Australia had this to say:

"We expect further policy easing, with the opportunity for the RBA to move back to the target more quickly. We see a further cash rate cut in November to a new record low of 0.75% but do not rule out the risk of further cuts or unconventional policy measures. In addition, we think that there is the need for further fiscal stimulus, through new infrastructure spending or the pull-forward of tax cuts."

With respect to inflation, NAB analysts explained, "Indeed, the RBA sees inflation remaining low for a significant period with little chance of a rise in rates before inflation sustainably rises towards the middle of the band – a gradual process. It should be noted that while the RBA currently forecasts growth around 0.5ppt stronger than our own persistently over the next two years, the outlook for inflation is not dissimilar. Our outlook for the labour market is weaker."

Markets down in the Trumps

Meanwhile, the investor appetite for risk is plagued by ongoing concerns over a slowdown in global growth and recessionary indicators all firing off throughout economic powers such as China, Germany, the UK and US. Donald Trump is losing confidence in the markets, with stocks down big percentage falls throughout the week and he is being more defiant by the day over his correspondence to the world through Twitter: 

"The Fake News Media is doing everything they can to crash the economy because they think that will be bad for me and my re-election. The problem they have is that the economy is way too strong and we will soon be winning big on Trade, and everyone knows that, including China!"

Looking ahead

There will now be a keen focus back to the Federal Reserve with the forthcoming key events in the minutes of the last meeting and the Jackson Hole. We will also get positioning data tomorrow which will be interesting to see how positioned the market s back into the Dollar - For if it is taking up its safe-haven role again, AUS/USD will find a hard time of correcting much higher from here. 

"Recent escalation in US/China trade talks and the tightening in financial conditions have placed the Fed in a tight spot. With its reaction function closely tied to global "crosscurrents", we expect communication though the Minutes and J. Hole symposium to attempt to clarify the path forward. While Fedspeak should support near-term easing, the market is more than priced for it," analysts at TD Securities explained. 

AUD/USD levels