> JP August Final Manufacturing PMI : 52.7 v. 52.4 exp.
> AU Q2 GDP : 0.7% v. 0.5% exp.
> CN August Caixin Manufacturing PMI : 49.2 v. 50.2 exp.
> EU August German Manufacturing PMI : 62.6 v. 62.7 exp.
> US August ADP Non-Farm Employment Change : 374K v. 620K exp.
> US August ISM Manufacturing PMI : 59.9 v. 58.5 exp.
> US August ISM Manufacturing Prices : 79.4 v. 83.8 exp.
> US EIA Crude Oil Inventories : -7.2Mio v. -2.5Mio exp.
Overnight Headlines (BBG)
> Soft commodities have dropped in the aftermath of Hurricane Ida with corn and soybeans seeing prices drop to nearly 2 month lows
> China did what they could to dent some of the rising commodity prices, with aluminium in their sights after hitting decade highs earlier in the week
What you need to know
Caution seemed to be the theme as investors sat on their hands ahead of the local Q2 GDP report and more data clues from the US, as Fed tapering expectations away in the background. The Q2 GDP expanded faster than market forecasts as household consumption and investment exceeded estimates, with the AU economy 0.7% stronger in the June quarter. Despite the positive news, the rally in the AUDUSD was lacklustre as the continued COVID lockdowns across the country will likely result in a very poor reading for the September quarter. Chinese Caixin manufacturing numbers missed the mark, contracting in the month of August for the first time since April 2020 as the Delta outbreak put sustained pressure on the Chinese economy.
The AUDUSD broke out as the London volume started to come into the market, as overseas investors decided to jump on the APAC pairs with NZDUSD doing the following this time around and up 0.35% on the session. The overnight session was focused on data coming out of the US, where all eyes are on labour market figures as that, not inflation, has become the main focus of the Federal Reserve. ADP numbers were softer than expected, although this may be much different than the official report on Friday markets chose to take the position of a looser Fed and the USD is down 0.15% in DXY terms and back toward the 92.50 level. Most of the AUD crosses higher on the day, with the AUDUSD touching a fresh high of 0.7384 before paring gains into this morning’s open. Equity markets both locally and abroad largely unchanged ahead of the important Friday NFP release, while UST yields are a touch lower on the 10y and 30y tenor. The uncertainty out of China with regard to commodity prices has seen base metals struggle as Iron Ore and Copper are both down on the day. WTI crude down 0.35% while Gold is unchanged.
The Day Ahead
> AU July Trade Balance : 10.10Bio exp.
> US Weekly Unemployment Claims : 342K exp.
> US July Trade Balance : -70.7Bio exp.
> US July Factory Orders : 0.4% exp.
> US FOMC Members Bostic and Daly to speak
Not expecting a huge amount of movement today for markets, if anything major to take place one can expect it to come overnight with unemployment claims and Fedspeak the risks in the overnight session. The AUDUSD has started off the month well, as the opportunity window may be closing if this US jobs report exceeds market estimates in a major way. All about the Fed tapering path, with a poor report likely to set up the AUDUSD for a rally all the way back up to the 0.74-middle.
Range Today : 0.7340 – 0.7395
The momentum for the pair is building for a sustained move higher, breaking through the 21DMA with ease and the 55DMA at 0.7377 providing little challenge all hinges on the market movement for Friday. Moves lower may find support at the EXP200DMA 0.7340, which has been a strong indicator intraday.
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