Mid-Day Report: RBNZ and Aussie Job Watched in Coming Asian Session

Dollar continues to consolidate recent sharp gains against European majors. Euro and Swiss Franc are mildly higher against the greenback today but strength of the recovery is very limited. GBP/USD edged lower to 1.6051 but quickly recovered as consolidations continue in tight range. Overall, the greenback is being supported by expectation that Fed will stop the asset buying program in October and start raising interests next year. A particular focus is how FOMC would modify the post meeting statement next week to set the stage for policy normalization. Meanwhile, Euro will stay soft on ECB outlook while Sterling would be pressured by uncertainties over Scottish independence referendum next week.

While European majors are weak, it should noted that commodity currencies are catching up this week. With Aussie being the weakest currency, followed by yen, and then Kiwi. Two important related events in the upcoming Asian session will be closely watched.

RBNZ will announce rate decision and is widely expected to hold the official cash rate unchanged at 3.50%. The central bank has been clear in its last statement that after 25 bps hike at every meeting since March, ” it is prudent that there now be a period of assessment before interest rates adjust further towards a more-neutral level.” And, RBNZ should now formally turn into the wait-and-see mode.

Australia will release employment data and is expected to show 15k growth in August, after the -0.3k contraction in July. Unemployment rate is expected to drop to 6.3% after sharp jump to 6.4% in July.

AUD/NZD’s rebound from 1.0489 extended to as high as 1.1294 last week and even breached 1.1197 resistance. Nonetheless, this week’s sharp fall in the cross suggests short term topping and some downside is in favor in near term. Overall, the structure of the rebound from 1.0489 is still corrective and thus, we’re expecting more consolidative moves, rather than anything imp us live. On resumption of the rebound, strong resistance should be seen below 38.2% retracement of 1.3793 to 1.0489 at 1.1751 to bring reversal. Meanwhile, below 1.0923 support will turn near term outlook bearish for 1.0489 low again.

Daily Pivots: (S1) 105.93; (P) 106.20; (R1) 106.46; More…

USD/JPY’s rally continues today and reaches as high as 106.79 so far. Intraday bias remains on the upside and current rally should now target 100% projection of 96.56 to 105.43 from 101.08 at 109.95 next. On the downside, below 106.03 minor support will turn bias neutral and bring consolidations. But downside should be contained well above 104.27 support and bring another rally.

In the bigger picture, whole medium term up trend from 75.56 is still in progress. We’re not too convinced with the medium term momentum yet and will be cautious on topping above 50% retracement of 147.68 to 75.56 at 111.62. Nonetheless, break of 101.08 is needed to signal medium term reversal, or outlook will stay bullish. Current rally could extend to 61.8% retracement at 120.13 on upside acceleration.

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
23:50
JPY
Machine Orders M/M Jul
3.50%
4.00%
8.80%

0:30
AUD
Westpac Consumer Confidence Sep
-4.60%

3.80%

12:30
CAD
Capacity Utilization Rate Q2
82.70%
82.50%
82.50%

14:00
USD
Wholesale Inventories Jul

0.50%
0.30%

14:30
USD
Crude Oil Inventories

-0.9M

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