15th September 2020 - AUD/USD: Flirts with 0.7300 ahead of RBA minutes, China data dump


Good Morning,

Market Headlines

Wall Street offered a healthier performance to start the week with there being signs of progress in developing a COVID-19 vaccine and a spurt of multibillion-dollar deals lifted investor optimism. US 2yr treasury yields rose from 0.13% to 0.14%, while the 10yr yield ranged between 0.65% and 0.67%. On the commodities front, brent crude oil futures fell 0.6% to $39.60, copper rose 1.0%, iron ore rose 1.0% to $130.25, and gold rose 0.9%.

Currencies

AUD/USD: 0.7265 – 0.7302

EUR/USD: 1.1844 – 1.1888

GBP/USD: 1.2820 – 1.2918

USD/JPY: 105.55 – 106.05

USD/CAD: 1.3154 – 1.3196

NZD/USD: 0.6685 – 0.6718

AUD/JPY: 76.92 – 77.26

AUD/NZD: 1.0859 – 1.0884

AUD Thoughts

- AUD/USD extends Monday’s recovery moves ahead of the key day.

- Market sentiment stays positive amid vaccine hopes, confidence in global central banks.

- Recovery in Aussie new cases confronts Sino-American tension, Brexit fears.

- RBA minutes can reiterate bearish bias, China data likely to recover in August.

Looking forward, Minutes of the RBA’s August month monetary policy meeting will precede China’s Industrial Production and Retail Sales data for the previous month to direct immediate AUD/USD moves.

Despite extending the Term Lending Facility and keeping the benchmark rate unchanged at 0.25%, the Reserve Bank of Australia (RBA) said, the economic downturn “is not as severe as earlier expected and a recovery is now underway in most of Australia.” As a result, traders will closely observe the statement for any positive signals to extend the latest recovery moves. On the other hand, China’s Retail Sales can overcome the previous month’s 1.1% declines with a 0.0% forecast whereas Industrial Production may rise 5.1% from 4.8%.

Given the upbeat expectations from the scheduled data/events, AUD/USD may stretch the recent pullback. However, a slew of major risk catalysts has been playing loud off-late, which in turn can surprise trades and hence warrant cautious moves.

A clear break of 0.7300 will enable the bulls to aim for 0.7340/45 ahead of challenging 0.7400 round-figures and August month’s peak surrounding 0.7415. Meanwhile, 21-day SMA near 0.7260 offers immediate support to the quote before the monthly bottom close to 0.7190.

Event Risk Data Today

AU – September RBA meeting minutes will be released today, providing additional colour on the Board’s considerations of “further monetary measures”.CN – August IP & retail sales

CH August industrial production and fixed asset investment have been lifted by the domestic recovery with output reaching pre-Covid levels (prior: -0.4%ytd y/y, market f/c: 0.2%ytd y/y - prior: -1.6%ytd y/y, market f/c: -0.4%ytd y/y). Retail sales remain in recovery mode (prior: -9.9%ytd y/y, market f/c: -8.8%ytd y/y).

EU – September ZEW survey continues to point to a strong recovery trend (prior: 64).

UK – August jobless claims, government’s furlough scheme has bolstered the job market, although the ILO unemployment rate will be challenged as measures roll off (prior: 3.9%, market f/c: 4.1%).

US – September Empire manufacturing, higher operating costs and depressed manufacturing revenues will likely limit further gains in the Fed Empire survey (prior: 3.7, market f/c: 6.5). Moderate growth for industrial production is expected in Aug, as uncertainties constrain the rebound (prior: 3.0%, market f/c: 1.0%)

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