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1 Sep 2015
Big week for AUS/USD; RBA and Chinese risk weighing heavy
FXStreet (Guatemala) - AUD/USD is within a bearish trend as early Asia walks in on the RBA interest rate decision day.
The pair was offered overnight in thin liquidity with London traders taking time out on a UK Bank Holiday, and drifted from away from the hourly 50 SMA and resisted by the 20 SMA on the same time frames while printing a low of 0.7082 when breaking down the 0.71 handle. The US shift offered some relief to the downside with a rally in the price of oil and the pair was able to re-base on the 0.71 handle for the Asian handover.
Week heating up for AUD/USD
This week will now start to heat up, with an initial focus on China and data arriving in the form of official NBS Manufacturing PMI for August, expected at 49.7% vs 50% in July and we have Non Manufacturing PMI for the same period at the same time. Later in the day we will have the final Caixin August PMI that will also be reported, expected at 47.1 flash reading. Australian building permits will be released between this Chinese data.
Ear to the ground on Chinese developments, implications for AUD/USD
We will also be keeping an ear to the ground for any further Chinese intervention (quantitative tightening) and watching 10-year U.S. Treasury yields in respect to the value of the greenback on the increase and general subsequent risk sentiment around AUD/USD as China keeps an eye on a possible Fed hike this year.
The PBoC have used the measure of selling in the region of between $150-$200 billion of its FX reserves (most of which is in dollar-denominated assets like U.S. Treasury bills and bonds) to protect its economy and markets from the recent surge of capital out of the country and in order to stabalise the RMB due to the prospects of a Fed hike this year. Head of European FX and cross-market strategy at Deutsche Bank, George Saravelos suggested, "The potential for more China outflows is huge...The bottom line is that markets may fear QT has much more to go."
AUD/USD trading heavy in the lead into an anticipated dovish RBA statement today
Analysts at RBS explained, "While the RBA is likely disappointed with the latest private cap-ex figures which showed a second consecutive 4+% decline in expenditures, we expect the RBA to leave the cash rate on hold." In respect of the statement, the analyst s said, "RBA has maintained a fairly positive outlook for the labour market, but the risks to the statement may be on the dovish side"
AUD/USD risks to the downside below 3-month resistance
Technically, Karen Jones explained that risks remain on the downside while capped by the 0.7293 3-month resistance line. Hourly MACD is turning positive, but rallies on AUD/USD could struggle on the 0.72 handle ahead of R2 and R3 (0.7250/0.7301). The pair remains with a bearish bias while changing hands below 0.7448 July 21 high and the 50 DMA at 0.7393.
The pair was offered overnight in thin liquidity with London traders taking time out on a UK Bank Holiday, and drifted from away from the hourly 50 SMA and resisted by the 20 SMA on the same time frames while printing a low of 0.7082 when breaking down the 0.71 handle. The US shift offered some relief to the downside with a rally in the price of oil and the pair was able to re-base on the 0.71 handle for the Asian handover.
Week heating up for AUD/USD
This week will now start to heat up, with an initial focus on China and data arriving in the form of official NBS Manufacturing PMI for August, expected at 49.7% vs 50% in July and we have Non Manufacturing PMI for the same period at the same time. Later in the day we will have the final Caixin August PMI that will also be reported, expected at 47.1 flash reading. Australian building permits will be released between this Chinese data.
Ear to the ground on Chinese developments, implications for AUD/USD
We will also be keeping an ear to the ground for any further Chinese intervention (quantitative tightening) and watching 10-year U.S. Treasury yields in respect to the value of the greenback on the increase and general subsequent risk sentiment around AUD/USD as China keeps an eye on a possible Fed hike this year.
The PBoC have used the measure of selling in the region of between $150-$200 billion of its FX reserves (most of which is in dollar-denominated assets like U.S. Treasury bills and bonds) to protect its economy and markets from the recent surge of capital out of the country and in order to stabalise the RMB due to the prospects of a Fed hike this year. Head of European FX and cross-market strategy at Deutsche Bank, George Saravelos suggested, "The potential for more China outflows is huge...The bottom line is that markets may fear QT has much more to go."
AUD/USD trading heavy in the lead into an anticipated dovish RBA statement today
Analysts at RBS explained, "While the RBA is likely disappointed with the latest private cap-ex figures which showed a second consecutive 4+% decline in expenditures, we expect the RBA to leave the cash rate on hold." In respect of the statement, the analyst s said, "RBA has maintained a fairly positive outlook for the labour market, but the risks to the statement may be on the dovish side"
AUD/USD risks to the downside below 3-month resistance
Technically, Karen Jones explained that risks remain on the downside while capped by the 0.7293 3-month resistance line. Hourly MACD is turning positive, but rallies on AUD/USD could struggle on the 0.72 handle ahead of R2 and R3 (0.7250/0.7301). The pair remains with a bearish bias while changing hands below 0.7448 July 21 high and the 50 DMA at 0.7393.