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US dollar strength weighs on risk

Four markets in focus today.

AUD/USD

The local currency will be back in focus today with the RBA rate decision due out at 14.30 AEDT. While no change is expected in rates, the language will be very interesting, particularly from an AUD perspective. The RBA has already done a good job in talking down the AUD to these subdued levels and I doubt they would want to see this work undone. As a result they are likely to take advantage of the current bearish momentum to push the AUD even lower. How they can achieve this though is debatable, but there will be plenty of caution heading into the statement. Before the RBA decision we have retail sales and current account data due out. On top of that, China releases its non-manufacturing PMI at midday and investors will want to see a continuation of recent strength in China data. All these releases have the potential to cause some volatility for the AUD today.

USD/JPY

The pair rallied to 103.13 overnight as the USD got a kick from the better-than-expected ISM manufacturing PMI data (57.3 vs 55.1). This was the fastest pace of US manufacturing growth since April 2011. Yen weakness was aided by some comments by BoJ Gov Kuroda saying they will continue to be aggressive until inflation is steady at 2%. The pair last traded above 103 in May when it rallied to 103.74. That is now the next key level to look out for.

Spot Gold

The precious metal continued to slide, with US dollar strength being the primary driver of the move. Confidence has certainly been rattled and we wouldn’t be surprised to see a continuation of gold weakness. The low from 28 June was 1180 and we could see this tested in the near term should the raft of economic releases from the US this week continue to show signs of strength.

Newcrest Mining

NCM continues to languish on the back of gold price weakness. The stock will be testing 2002 highs today and a break below $7.50 could encourage another wave of selling, with potential targets to $7.

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