Australia
The Australian dollar was aggressively sold lower to 0.7570 after a dovish RBA on Tuesday, as expected , left rates unchanged retaining its neutral monetary policy stance and reiterated risks associated with a rising AUD. However it enjoyed a brief rally a day later heading back to the 0.7630 region But for the last two days has resumed its southward track, not helped by some pretty average June services PMI data out of China. The Aussie remains under pressure now trading around 0.7578, not far from the weekly low set on Wednesday at 0.7570, this is despite strong local data released at yesterday which showed the local trade balance for May recorded a surplus of 2.471 billion in seasonally adjusted terms, more than doubling market’s forecast, helped by a sharp rebound in exports, up by 9% in the month.
However, the AUD has been affected by the negative tone in equities, as worldwide indexes closed in the red, affecting the commodity-related currency. It should have reasonable support at the 0.7570 level ahead of tonight’s Non-farm payroll figure. Major support is at 0.7535 which if breached would initially target 0.7500.
New Zealand
The New Zealand dollar has slid lower over the week from its high of 0.7344 on Monday to currently around 0.7286. The GDT auction was mixed on Tuesday night with milk powder prices marginally firmer, but this appeared to have little effect on the NZD. Fundamentals for the NZD still remain solid but the failure for the NZD to hold over 0.7300 is an issue, with the range now in the 0.7250-0.7300 region. We expect little movement ahead of tonight’s US jobs data, but with Central banks now starting to mop up excess liquidity any upward path ahead for the NZD will be a tough one. If tonight’s US data is solid a fall to 0.7200/10 is likely.
United States
Mixed data throughout the week, with last night’s ADP payroll June increase coming in below expectations at 158k against 188K forecast. The majority of job gains were in the service sector, however services PMI data was more positive and above previous forecasts. The market is looking for an increase of 178K for the Non-farm payroll tonight, but given the weaker ADP figure we are of the view that tonight’s US jobs data has the potential to disappoint. The G-20 is meeting in Hamburg over the next two days will bear watching but we do not expect any major market moving news to emerge. Normally this is a talk feast with a vague communique issued at the end, although this year will be more colourful with Trump and North Korea being the wildcards! The release of the June Fed minutes earlier in the week showed a Committee more divided than expected, but we still retain the view that the Fed will announce a launch of a new balance sheet policy in September with an additional hike in December of the Fed Funds target range. The EUR continues to gain on the USD and is now at 1.1420 after the EUR/USD trading down at 1.1335 earlier this week….upside looks to be 1.1440 and support at 1.1350, but if the jobs figure is an unexpected number look for ranges to be exceeded.
United Kingdom
The GBP dropped to a weekly low of 1.2892, after data this week showed June UK service sector growth slowed and business optimism fell to its lowest level since the Brexit vote last year. The GBP/USD is now back around 1.2966 ahead of the release of UK industrial and manufacturing May figures this Friday, together with the same month trade balance, which may set the tone for the pair, ahead of the US employment report. With 1.3047 in May being the yearly high so far, the 1.3000 level is critical as gains above this level have not been able to be sustained. A break below 1.2890 would extend to 1.2860.
Europe
Release of the ECB minutes last night confirmed that pressure to remove the easing bias had increased with positive survey data and the broadening and strengthening of Eurozone growth. Officials commented that the ECB’s non-standard monetary policy was “not eternal” and QE is not a permanent policy tool. Other comments included reference to the fact that the economic recovery would “open the door” to normalisation now it appeared to be on a stronger footing. The EUR/USD pair trimmed most of its weekly losses and bounced back above the 1.1400 level, on the expected boost from the ECB’s account of the monetary policy meeting, as the document showed that policymakers discussed removing the pledge to increase their bond-buying program if required. Currently at 1.1413 the EUR/USD ranges are 1.1380 – 1.1460 as we head into tonight’s US jobs data.
Japan
The Japanese Yen has had a softer tone over the week with the USD/JPY trading from 112.18 on Monday to 113.82 last night, after the BoJ boosted 10 year Japanese bond purchases. It is currently around 113.68, with a 112.90 -113.70 range ahead of the US data tonight. A break on the upside would then target 114.05.
Canada
Since the start of the week, crude oil performance has been the primary driver of the CAD’s price action as the commodity-linked CAD reacted to sharp fluctuations on changing oil market dynamics. After losing more than 4% on Wednesday, the barrel of West Texas Intermediate gained more than 2% on Thursday and reached its daily high at $46.50. Consequently the CAD has strengthened over the last two days and the USD/CAD is now at 1.2986 after being at 1.3013 on Wednesday. Support is seen at 1.2910 with upside at 1.3020.