1st October 2020 - AUD/USD bulls aim for 0.7200 amid upbeat trading sentiment


Good Morning,

Market Headlines

Choppy night in US equity markets overnight, the Dow Jones Industrial Average climbed 1.2%, to 27,781, the S&P 500 gained 0.83%, to 3,363 and the Nasdaq Composite was up 0.74%, to 11,167.51. US 2yr treasury yields rose from 0.12% to 0.13%, while the 10yr yield rose from 0.64% to 0.70%. Commodities, Brent crude oil futures fell 0.5% to $40.85, copper rose 1.5%, and iron ore rose 3.8% to $123.45, while gold fell 0.4%.

Currency

AUD/USD: 0.7107 – 0.7175

EUR/USD: 1.1685 – 1.1752

GBP/USD: 1.2808 – 1.2945

USD/JPY: 105.41 – 105.74

USD/CAD: 1.3302 – 1.3411

NZD/USD: 0.6570 – 0.6626

AUD/JPY: 75.05 – 75.70

AUD/NZD: 1.0806 – 1.0850

AUD Thoughts

- AUD/USD snapped five-month run-up in September despite consolidation from 0.7004 during the last few days, bulls aim for 0.7200 amid upbeat trading sentiment

- Vaccine hopes, expectations of US stimulus favoured market’s risk-on before witnessing disappointment in the last hour.

- US presidential debate failed to offer any major clues, China PMIs and US ADP flashed welcome numbers.

- Beijing is off for the golden week, Aussie PMIs and risk catalysts should be carefully watched.

Looking forward, China’s absence for one full week can restrict the market moves in Asia. Though, Australia’s AiG Performance Mfg. Index and Commonwealth Bank Manufacturing PMI can offer intermediate moves. It should, however, be noted that the risk catalysts are the key to watch.

Despite surging to highest in more than a week, AUD/USD is yet to clear the September 09 low of 0.7191, needless to mention about 50-day SMA level near 0.7205, which in turn probe the pair buyers. Though, sellers may await a downside break of 10-day SMA, currently around 0.7135, for fresh entries.

Event Risk Data Today

Australia: The AiG PMI dropped 4.2pts to 49.3 in August as Victoria’s second lockdown was felt which will also have an effect on September’s CoreLogic home value index, mkt f/c - 0.3% after a 0.5% fall in August.

Prime Minister Morrison will deliver a ‘Pre-Budget Address’ at the National Press Club at 12.30pm AEST.

Japan: The Q3 Tankan large manufacturing index and Nikkei’s manufacturing PMIs are expected to reflect further weakness for industry.

Euro Area: The recovery in the manufacturing PMI is being supported by new orders and improved business expectations (prior and market f/c: 53.7). Unemployment is expected to increase from 7.9% to 8.1% in August with rising new Covid cases and temporary stimulus measures rolling off.

US: Initial jobless claims are expected to remain high. Expiring Federal supplementary unemployment benefits will also effect personal incomes in August (prior: 0.4%, market f/c: -2.5%), and will be a headwind for personal spending (0.8% mkt f/c August). PCE deflators rose 0.3% in July and the market expects same number for August, for an annual pace of 1.4% for the core measure (which the Fed targets). ISM manufacturing will point to growth being sustained at a robust pace. Construction spending should be boosted by residential activity.

The FOMC’s Williams (01:00 AEST) and Bowman (05:00 AEST) will speak.

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