- Australia relaxes Covid-19 restrictions, to the AUD’s advantage.
- Disappointing NFP job reports raise doubts on tapering.
- USD could be impacted greatly by the impending release of four major fundamental movers this week, including minutes of FOMC meeting and jobless claims figures.
The Australian dollar continued with its resurgence against the US dollar, taking advantage of weak US jobs data release on Friday to rise by 0.43% in 24 hours to trade at 0.7336 at 0825 GMT on Monday. The Aussie bulls are also motivated by the relaxation of Covid-19 restrictions in Sydney, which has raised confidence of an improved performance by the Australian economy in the fourth quarter of the year.
Weak jobs data raises doubts over Fed tapering
The disappointing NFP job numbers that were released on Friday last week gave the AUD some breathing space, as the USD slightly lost balance resulting in a drop before it picked up again. Investors are now wondering if the disappointing numbers will trigger, or sway the Federal Reserve from starting a tapering of its asset purchases, as early as November.
Australia relaxing Covid-19 restrictions
After a 100 day lockdown, one of Australia’s most populated states, New South Wales, will be rolling back some of its Covid-19 restrictions after achieving over 70% vaccination. This move is expected to have a major impact on the economy especially after the next step of easing the travelling restrictions has been implemented.
The US government now has time to plan for debt payment, after the debt ceiling was pushed to December, following the meeting between the US government and several stakeholders.
The AUDUSD growth trajectory in the mid-term will depend a lot on developments in China, one of Australia’s biggest trading partners. The seemingly unending Evergrande debt crisis, together with the slow pace in China’s economic growth amidst a power crisis in the nation could hamper stronger gains by the AUD.
USD movers and shakers this week
Despite the disappointment on the NFP job reports, there are major events in the economic calendar this week that will determine the direction of the dollar. These include the September US inflation report and the weekly US MBA mortgage applications which will be released on Wednesday 13th.
The other weighty market mover will be the FOMC meeting minutes being released on the afternoon of October 13th. The minutes are expected to shed more light on the tapering debate, as questions are being asked on whether the tapering will be affected by the jobless claims figures.
The US budget statement for September will be released the following day together with the jobless claims figures and PPI index. As markets close on Friday, investors will also be keen on the release of September’s US retail sales report. Therefore, the US dollar could be swayed by quite a number of fundamentals this week, which could bring about choppiness. Nonetheless, the FOMC minutes and jobless claims could carry more weight for forex markets.
AUDUSD has been on an uptrend for the past 7 days and this has created a strong possibility of a continuation of a bullish momentum. In the last 11 days, the Relative Strength Index (RSI) has risen steadily from 36 to the current 56. The strong momentum is further underlined by the pair’s MACD staying above the signal line as shown on the chart below.
The current bullishness around the AUDUSD pair is likely to see the price rise to the first resistance at 0.7347, which would be a 20-day high. Beyond that point, the bulls could push the price to the second resistance at 0.7399, which is just above the ascending channel. Barring a significant shift in fundamentals, any downward action is likely to be marginal, with the first support likely to be established at 0.7283 and the second one at 0.7269.