AUD focuses on capex numbers

The strength we’ve been seeing in the USD lately has finally started waning, with investors and traders now at that inflection point where a fresh catalyst is needed.

Source: Bloomberg

Some of the key risk currencies managed to reverse a bit against the greenback, with even the euro enjoying some minor upside. EUR/USD is just trading back in that 1.3200 region where we are likely to see some consolidation in the near term. It’ll be interesting to see how the pair will play out positioning-wise ahead of next week’s ECB meeting.

If the ECB doesn’t announce further stimulus, the market is likely to be looking for hints that stimulus is imminent, at the very minimum. Moves in bonds have also been interesting, with yields continuing to cool. It seems the most logical play here would be to wait and sell EUR/USD rallies with the best value presented in the 1.3300 region.

On the economic front, the next key readings for region will be CPI and any misses will fan the stimulus conversation further. Remember Mario Draghi specifically pinned subdued demand as a concern.

Uptrend on AUD/USD remains intact

The local currency continues to hold its ground against the greenback and will be in focus today, as Q2 capex numbers and China’s industrial profits data are due out. AUD/USD has been threatening to push higher, benefiting from improving risk sentiment as investors bet on stimulus.

The private capex number is perhaps one of the most important readings for the AUD – it gives an indication of future spending intentions and is also a good feed through to the Q2 GDP report. China’s industrial profits showed a 17.9% jump over the previous month and, following some disappointing recent releases, there will be a lot of pessimism heading into the data.

Locally, private capital expenditure data is expected to show a 0.9% decline, which is an improvement from the previous quarter’s 4.3% contraction. The key reading going forward will be capex intentions and this will be the price action driver if they are any surprises.

At 11am, we also have the HIA new home sales reading. This is unlikely to bring any fireworks, given the big readings are out at 11.30am.

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