AUD in focus with jobs ads due out

The US dollar continued to lose ground as the US government shutdown stretches on.

- USD remains subdued

- AUD downside limited on local data

- Euro flat but pound supported

The political impasse in the US has kept most risk assets under pressure, but most importantly has also weighed on the USD. This has resulted in a flight to safety, with the yen and gold being the biggest beneficiaries. The AUD has been rallying since the RBA maintained a neutral stance & failed to warn on recent FX appreciation. Risk currencies have actually been quite resilient considering the magnitude of the situation.

AUD downside limited on local data

AUD/USD is holding in its new trading range between 0.93-0.95 and is actually closer to the top end of that range. We feel downside for the AUD on local economic data is limited at the moment, particularly considering the limited chances of another rate cut anytime soon. Goldman Sachs still feels we will get a November rate cut but considering the strong recovery in the property market and risk of an asset price bubble, I feel the RBA will be happy to maintain a wait and see approach for a while. Today we have ANZ job ads and NAB business confidence due out at 11:30 AEST. Thursday is the big one; when we get jobs numbers. While these always offer a good indication of how the economy is performing, we don’t expect any major downside to negative releases on the local economic front. Moves in the local currency are likely to be more aligned to global macro-economic themes at the moment. China returns to trade today and will have to play catch-up to other equities, having missed out on the shutdown drama. Most importantly, iron ore will be trading again and this tends to cause some volatility for the AUD.

Euro flat but pound supported

EUR/USD has held a very tight range and is currently sidelined at 1.358 with a clear wait-and-see approach by traders. Later today we have German and French trade balance along with German factory orders due out. However we don’t expect any major moves from this data with traders on US politics headline watch. [currenciesGBPUSD] continued its recovery after bouncing off the uptrend support, which comes in at 1.60. Cable is back at 1.61 now and we expect to see it supported heading into the BoE. Mark Carney has been quite hawkish and this has prompted the bulls to push cable higher over the past few weeks.

AUD/USD new trading range holds

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.