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Global Market Update
The View from Australia

by Craig Killaby | August 30, 2021

Data/Speakers

 

> JP July Retail Sales : 2.4% v. 2.1% exp.

> AU Q2 Company Operating Profits : 7.1% v 2.5% exp.

> CA Q2 Current Account : 3.6Bio v. 1.5Bio exp.

> US July Pending Home Sales : -1.8% v. 0.5% exp.

 

Overnight Headlines (BBG)

> Hurricane Ida made landfall overnight in the US, with devastating impacts of the storm putting pressure on a number of soft commodities as supply chain disruptions took hold

> Powell’s dovish tone from the weekend was met with choppy trading for the Dollar as end of month portfolio rebalancing a factor

> CFTC data shows that leveraged funds are the least bullish since June 2020 as net long positions have been cut for the third consecutive week

What you need to know

After what was a relatively dovish speech from the Chairman of the Fed last Friday evening, the AUDUSD was able to recover back above the 0.7300 handle as rate hike projections from the US Fed were kicked out down the track as tapering conversations remained. Local risk appetite looked to be positive as investors interpreted Powell’s Jackson Hole speech as dovish, at least more dovish than some of his colleagues, and saw the Dollar weaken to start off the week. Intraday high for the Aussie was 0.7318, although unable to hold as the NSW COVID case numbers put some downward pressure on sentiment as it becomes more clear by the day how long NSW will be closed for.

Sideways trading for the majority of the session, with the Aussie oscillating around the 0.7300 handle, while its APAC counterpart saw very similar price action despite NZ’s PM Ardern calling an easing of restrictions in NZ. Month end rebalancing flows have seen the Dollar trade unchanged on the session, with the losses seen over the weekend on the Jackson Hole conclusion. UST yields are down a touch as investors look ahead to what is likely to be some tough data in the next month as the reality of the Delta outbreak’s impact on growth grows. Hurricane Ida has made landfall in Louisiana overnight, with the storm proving to be devastating as the region now has to deal with the recovery process, which is likely to be lengthy. Commodity markets had a good end to last week, dovish Powell lending a helping had to softer prices in the wake of the China regulations. Copper and Iron Ore have recovered to kick off the week, both up over 2%, while Gold is up 1.1% and WTI crude continues to rebound up near 2%.

The Day Ahead

 

Data

 

> CN August Manufacturing PMI & Non-Manufacturing PMI : 50.2 & 52.1 exp.

> NZ August ANZ Business Confidence : -3.8 prev.

> AU July Building Approvals : -5.0% exp.

> AU Q2 Current Account : 21.5Bio exp.

> CA June GDP : 0.7% exp.

> US August Chicago PMI : 68.0 exp.

> US August CB Consumer Confidence : 122.9 exp.

 

After getting some more of tomorrow’s GDP inputs yesterday, there are some grumblings of a technical recession in the wake of the huge impacts that the strong lockdowns will, and have had on the local growth story. Today, markets will digest the Chinese PMI figures at 11am ahead of the final puzzle piece by way of the Q2 net export figures this morning.

 

End of month flows into the fixing will be interesting to watch, as the main data event doesn’t come until Friday night as the US Non-Farm Payroll figures hit the wires. The next few days could be an opportunity for those needing the AUDUSD higher, as a strong report may see the tune change quickly from the world’s largest Central Bank.

 

Range Today : 0.7250 – 0.7315

 

AUD/USD Technicals

 

Although the momentum is starting to become moderately bullish, there are some significant obstacles ahead for the pair as 0.7340 becomes the level to watch on a move higher. Last Friday’s session low of 0.7222 provides support in the near-term, with the recent low of 0.7106 still the downside target. Poor China numbers may see a softening of the pair, with sentiment still weak and limiting the upside potential. The 21DMA at 0.7302 will be the level to watch, not too far off now a break through may see yesterday’s high tested.

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