Australian Dollar, Employment Data and RBA Policy Expectations, Talking Points:
- NAB’s Business survey came in weakly again
- And it has yet to encompass the current US-China trade standoff
- The Australian Dollar market’s focus is elsewhere anyway
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The Australian Dollar market was probably too focused on overall risk appetite Tuesday to worry overmuch about what turned out to be another gloomy business confidence survey from its homeland. The wait for this week’s main local event probably blunted its impact too. Official employment data will come out on Thursday, and the Reserve Bank of Australia has made it clear that it is focusing on these numbers intently when setting monetary policy.
Still, April’s Business Confidence indicator from major local lender National Australia Bank came in at zero, with the March figure revised down to -1 from a former reading which had also been zero. The assessment of Current Conditions limped over the line at 3, down from 7 last month.
Of course, US-China trade tensions have reached an even lower pitch in May, and without any sign of resolution here Australian confidence may only have further to fall. However, the AUD/USD rate didn’t move much on the data either way.
The Reserve Bank of Australia surprised the markets last week by declining to cut the key Official Cash Rate from the 1.50% record low which has endured for nearly three years. In doing so it flagged up its focus on the labor market, which has been arguably the most consistent bright spot in the economic data calendar. Unemployment has declined consistently since 2015 and participation in the labor market remains at record highs.
The problem for the RBA is that none of this has been desperately inflationary, with consumer prices rising at a rate far below the central bank’s 2-3% target. It still seems to think that continued employment gains could see prices rise, but the markets don’t seem to agree.
Interest rate futures markets still price in two quarter point cuts to the OCR over the next eighteen months, much as they did before the RBA pronounced last week. April is expected to see a rise of 15,000 jobs, for an unchanged unemployment of 5%. That would probably be regarded as yet another strong showing, and the extent to which it supports the Aussie, or affects interest rate prognoses will be fascinating.
However, weaker business confidence hardly augurs well for continued strong employment growth. Firms worried about the future do not tend to hire. At present, rate futures markets fully price in a cut by August, but a move at the next RBA policy meeting in June is not thought likely.
AUD/USD remains under quite severe pressure with its current level well below the downtrend line which has dominated trade since early 2018.
The next clear downside target is this year’s lows, which were made in January.
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— Written by David Cottle, DailyFX Research
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Weekly Trade Levels for US Dollar, Euro, Sterling, Loonie, Gold & Oil
DXY, Euro, Loonie Monthly Opening-Ranges Intact
The US Dollar Index is trading into the monthly opening-range highs into the start of the week and the focus is a reaction around the 98.05/10 resistance zone- note that the monthly ranges in Euro and Loonie also remain intact. In this webinar we review updated technical setups on DXY, EUR/USD, USD/CAD, GBP/USD, Crude Oil (WTI), Gold, USD/JPY, AUD/USD, EUR/AUD & SPX.
Why does the average trader lose? Avoid these Mistakes in your trading
Key Trade Levels in Focus
DXY – Immediate focus is on topside resistance at 98.05/10. Initial support at 97.87 with near-term bullish invalidation raised to 97.71.
EUR/USD – Euro is coiling into the monthly opening-range just above slope support. Immediate focus is on support at 1.1140. Initial resistance at 1.1187 with near-term bearish invalidation at monthly-open resistance at 1.1215– look for a bigger reaction there IF reached. A break lower would expose 1.1110.
GBP/USD – Sterling broke below multi-month slope support last week with price responding to near-term pitchfork support into the open. Initial resistance at 1.2798 with bearish invalidation at 1.2859. Downside support objectives at the August low-day close at 1.2697 and the 100% extension at 1.2662.
Gold – Risk for near-term recovery while above the yearly / monthly low-day close at 1270. Initial resistance at 1280 with near-term bearish invalidation with the monthly open a 1283.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Key Event Risk This Week
Economic Calendar – latest economic developments and upcoming event risk
Active Trade Setups:
—Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex
AUDUSD Soars on Shock Election, Apple Shares Slump, Risk of S&P 500 Drop
AUD: The Aussie outperforms following a shock election outcome, in which Prime Minister Scott Morrison secured re-election (full story). In reaction, the Aussie gapped higher at the Asia open, reclaiming the 0.69 handle against the greenback. However, as equity markets have headed lower throughout the European morning, risks are for gains to be faded. Alongside this, key headwinds in the form of trade war tensions and a potential RBA June rate cut are likely to limit upside. Reminder, RBA Governor Lowe due to speak tonight after RBA meeting minutes (calendar)
Crude Oil: Oil prices surged at the Asia open as Saudi Arabia signalled that cuts could be extended throughout the remainder of 2019 at the JMMC meeting, while President Trump had also stepped up his critical rhetoric towards Iran. Although, with equity prices beginning to push lower, oil prices have pared the majority of its initial gains.
Equities: US equity futures have headed lower amid the continued crackdown by the US on China’s Huawei, which in turn has chipmakers come under pressure, while Google also stated that they are to restrict the company’s use on android services. Elsewhere, Apple’s price target had been cut by HSBC to $174 (median street price target = $220), citing concerns over China, while tariff led price increases on Apple products could also have dire consequences on demand. Apple shares currently lower by 2.4% in pre-market.
Source: DailyFX, Thomson Reuters
DailyFX Economic Calendar: – North American Releases
WHAT’S DRIVING MARKETS TODAY
- “Gold Price Sell-Off Continues, Silver Price Hits a Six-Month Low” by Nick Cawley, Market Analyst
- “COT Report: Japanese Yen and Euro Shorts Collapse, USD Longs Reduced” by Justin McQueen, Market Analyst
- “Crude Oil Price May Be Carving Out a Top” by Paul Robinson, Currency Strategist
- “Using FX To Effectively Trade Global Market Themes at IG” by Tyler Yell, CMT , Forex Trading Instructor
— Written by Justin McQueen, Market Analyst
To contact Justin, email him at Justin.email@example.com
Follow Justin on Twitter @JMcQueenFX
Gold Price Sell-Off Continues, Silver Price Hits a Six-Month Low
Gold (XAU) and Silver (XAG) Price Analysis and Charts.
Gold (XAU) Needs to Support to Hold
The sell-off on gold continues with the precious metal down around $30 in less than a week. Gold is under pressure from a resurgent US dollar, buoyed by last Friday’s Uni of Michigan data which smashed expectations and hit a multi-year high. The important 61.8% Fibonacci retracement level at $1,287/oz. failed to provide any support when broken last week, while the $1,287 – $1,281/oz. zone made up of old horizontal support is being tested now. A clear break and close below opens the way to the recent double bottom around $1,266/oz. which is currently being guarded by the 200-day moving average at $1,268.6/oz. Below here the 50% Fibonacci retracement level at $1,262/oz heaves into view.
Gold (XAU) Daily Price Chart (August 2018 – May 20, 2019)
Silver (XAG) Nears a Fresh Six-Month Low
Another precious metal under heavy selling pressure. Silver is now at levels last seen in early December last year and is over 11% lower since making its recent high of $16.21/oz. in late February. The downtrend since the late-February high continues to be respected and it is possible that silver completely retraces all the way back down to the November 14 low at $13.89/oz. Psychological support at $14.00/oz. may slow the decline, while the CCI indicator shows that the market is extremely oversold.
Silver (XAG) Daily Price Chart (August 2018 – May 20, 2019)
IG Client Sentiment data show that retail traders are 79.1% net-long gold, a bearish contrarian indicator. Recent daily and weekly sentiment shifts give us a stronger bearish contrarian bias.
— Written by Nick Cawley, Market Analyst
To contact Nick, email him at firstname.lastname@example.org
Follow Nick on Twitter @nickcawley1
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