- We have had the first Aussie related market data today which has sent the Aussie a tad lower, currently trading at 0.7140, printing a low of 0.7137 on the release.
- AUD/USD dropped following a terrible business conditions number of 2 vs 11 prior and traders brace for more to come in this week's CPI, Fed, nonfarm payrolls and trade talks between US/China.
Yes, you read that number correctly, NAB's business conditions 2 vs the prior 11. The long term average is 6. At the same time, business confidence read a surprising 3, in line with the prior 3. However, the confidence index has fallen steadily over the past year, from above 10 to 3 in Dec, a low since 2016 and below the 25 year average of 6. However, the RBA is more concerned about conditions due to its correlation with business activity.
Bearish risks on the cards for the Aussie
This data, accompanied with warnings fro the IMF, Apple's CEO, Tim Cook and overnight's insight from bellwether Catapillar to this week's tidal wave of earnings from Wall Street, risk sentiment is on shaky grounds. AUD is a closely correlated currency to risk appetite and should this week's Sino/US trade talks give rise to concern, you can bet your bottom greenback that the Aussie will cave in - Perhaps the CPI will be firmer than expected, stalling prospects of an RBA rate cut so soon, but if not, and considering NAB's recent announcement that it is going to raise its standard variable rate for owner-occupiers repaying principal and interest by 0.12 percentage points to 5.36 percent this Thursday, just months after Commonwealth Bank, Westpac, and ANZ imposed out-of-cycle hikes, the bar will be lowered for an RBA cut which would weigh on AUD/USD.
AUD/USD levels
"Dips lower will find minor support at 0.7077/65 and the 0.7022 end of October low. Beyond this pullback, the market targets the September and early November highs at 0.7302/14 and the 200-day ma at 0.7299, where it is expected to struggle" analysts at Commerzbank argued.
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