AUD/USD is showing little movement on Friday, as the pair trades at 0.7550. On the release front, the market focus is on US employment numbers, led by Nonfarm Employment Change, one of the most important economic indicators. We’ll also get a look at wage growth data and the unemployment rate. There are no Australian releases on the schedule.
Australian business and consumer indicators were a disappointment on Thursday. Private Capital Expenditure fell 5.3% in the second quarter, weaker than the forecast of -4.0%. Retail Sales, the primary gauge of consumer spending, edged lower to 0.0% in July, shy of the estimate of 0.3%. This marked the indicator’s weakest reading since February. Despite the weak numbers, the Aussie has posted slight gains in the Thursday session. The markets are keeping a close eye on the RBA, which will set interest rates on September 6. The bank is not expected to change the current rate level of 1.50%, but the RBA has surprised the markets with unexpected quarter-point cuts in the past.
US employment numbers have looked solid this week, but the economy be handed a report card on Friday, with the release of Nonfarm Employment Change. Unemployment Claims came in at 263 thousand, better than the forecast of 265 thousand. It marked the third straight week that the indicator has beat estimates. Earlier in the week, the ADP Nonfarm Employment Change was little changed in August, posting a gain of 177 thousand. This beat the forecast of 174 thousand, the third straight month the indicator has exceeded the forecast. Will the NFP report follow suit? The July reading of 180 thousand was dismal, as the actual reading was just 180 thousand. The bar for August is considerably lower, with a forecast of 180 thousand. The markets will also be keeping a close eye on Average Hourly Earnings, which measures wage growth. The estimate for the August report stands at 0.2%.
With a US rate hike later in September yet again on the table, Friday’s employment numbers will be even more critical. The catalyst for renewed optimism about a rate hike was Federal Reserve chair Janet Yellen’s upbeat speech about the US economy and her broad hint that the case for a rate hike had strengthened. However, Yellen did not provide any specifics on a timeline for a move by the Fed. As for Friday’s employment releases, August job data is often unreliable and tends to miss market forecasts. If the August NFP follows this trend with a soft showing, the Fed may give the economy a “free pass” and overlook it. At the same time, a strong release will not mean that a September hike is a lock. Given the exceptional strength of the labor market, the Fed will find it hard to justify a rate increase strictly based on strong job numbers. Stronger inflation numbers for August, for example, would make a rate hike an easier sell for Fed members who remain uneasy about raising rates. These indicators will be released in mid-September, just before the Fed policy meeting on September 21. For those traders tracking the odds of a rate hike in 2016, the CME Group (NASDAQ:CME) FedWatch tool, the likelihood of a September hike has dropped to 24 percent, while a December increase is pegged at 56 percent.
Friday (September 2)
- 8:30 US Average Hourly Earnings. Estimate 0.2%
- 8:30 US Nonfarm Employment Change. Estimate 180K
- 8:30 US Unemployment Rate. Estimate 4.8%
- 8:30 US Trade Balance. Estimate -43.0B
- 10:00 US Factory Orders. Actual 2.1%
*All release times are EDT
* Key events are in bold
AUD/USD for Friday, September 2, 2016
AUD/USD September 2 at 6:30 EDT
Open: 0.7550 High: 0.7562 Low: 0.7536 Close: 0.7545
- AUD/USD was flat in the Asian session. In European trade, the pair posted small gains but has retracted and given up these gains
- 0.7440 is a strong support line
- 0.7560 was tested earlier in resistance and is a weak line. It could break during the North American session
- Current range: 0.7440 to 0.7560
Further levels in both directions:
- Below: 0.7440, 0.7339 and 0.7200
- Above: 0.7560, 0.7701, 0.7835 and 0.7938
OANDA’s Open Positions Ratio
AUD/USD ratio is unchanged on Friday, consistent with the lack of movement from AUD/USD. Currently, long positions have a majority (56%), indicative of trader bias towards AUD/USD breaking out and moving to higher ground.