FOMC minutes fail to inspire the greenback

The AUD has been the main currency to watch in Asian trade, with a couple of economic releases resulting in some movement. 

AUD/USD dipped below 0.89 earlier on some mild USD strength printing a low of 0.8883. However better than expected retail sales data saw it regain some strength and rise to 0.891. November retail sales came in at +0.7%, much better than the expected +0.4%. However, building approvals for the same period were a little worse than expected at -1.5%. Buyers have been unwilling to commit to further AUD longs ahead of China data, which is due out shortly. Keep an eye on China’s inflation reads with a result above 3% likely to cause AUD weakness. China data has been fairly unpredictable over the last couple of months and therefore traders seem content with exercising some caution.

Non-farm payrolls expectations ramp up

USD/JPY is below 105 after some choppy trading on the back of the FOMC minutes. USD/JPY nudged through 105, but has since pulled back into the 104.80 region. Minutes from the Fed’s December meeting didn’t bring too many surprises. With most Fed members supporting the decision to taper as the economic benefits of the program have diminished, the conversation has switched to whether we’ll see a more deterministic path to winding back on asset purchases.

The USD will remain the main source of volatility for the pair as the positive ADP non-farm payrolls print sees analysts revise their calls for Friday’s official payrolls reading. This has prompted some analysts to feel Friday’s official non-farm payrolls reading will come in quite strong. Current expectations are for 194,000 jobs to be added with the unemployment rate flat at 7%. Goldman Sachs has upped its estimate to 200,000 and Deutsche Bank to 250,000. Therefore there is strong potential for an upward surprise which would ultimately lift the greenback and drive USD/JPY higher. I still feel traders could continue to buy the dips in the pair.

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