3rd September 2021 - AUD/USD hits monthly top around 0.7400 on softer USD ahead of US NFP

Market Headlines

The US dollar fell further ahead of key Non-Farm Payrolls (jobs data) and amid elevated risk sentiment. The S&P500 is up 0.3% at a fresh record high. Bond yields are little changed.

The USD underperformed all the majors, with other defensive currencies also performing poorly. EUR rose from 1.1840 to 1.1876 – a one-month high, partly helped by strong Eurozone PPI data. USD/JPY hardly moved, stuck between 109.90 and 110.10. AUD rose from 0.7380 to 0.7409 – a one-month high. Outperformer NZD rose from 0.7065 to 0.7120 – a two-month high. AUD/NZD slipped from 1.0436 to 1.0403.

Commodities, Brent crude oil futures rose 1.8% to $73, copper rose 0.5%, gold fell 0.2%, and iron ore fell 1.7% to $140.

Overnight Currency Range

AUD/USD 0.7356 0.7409

EUR/USD 1.1834 1.1876

GBP/USD 1.3768 1.3840

USD/JPY 109.91 110.12

NZD/USD 0.7058 0.7120

USD/CAD 1.2549 1.2636

USD/CNH 6.4478 6.4591

AUD/JPY 80.85 81.52

AUD/NZD 1.0402 1.0436

AUD Thoughts

AUD/USD portrays typical pre Non-Farm Payroll jitters while taking rounds to the 0.7400 threshold, the monthly high, as Asian traders brush their screen for crucial Friday. Having initially eased on covid woes the previous day, the Aussie pair refreshed the monthly high, also printing a three-day uptrend, while closing around 0.7410.

The generalized US dollar weakness could be linked to the AUD/USD pair’s latest run-up. That said, the US Dollar Index (DXY) dropped the most in a week on Thursday to the one-month low as market players reject tapering concerns amid a run of early signals for today’s US jobs report.

On Thursday, the Initial Jobless Claims and Continuing Claims eased from the market consensus for the week ended on August 27. The four-week average of Initial Jobless Claims also declined from 366.75K to 355K. It should be noted that the Goods and Services Trade Balance eased in July whereas the Factory Orders came in better-than-expected for the said month. On the other hand, the Aussie calendar marked an upbeat Trade Balance for July.

Other than the data, receding hospitalization in the US battles the record high daily infections in Australia to keep the market’s mood positive and weigh on the US dollar. It’s worth noting that the increased odds of the European Central Bank’s (ECB) reduction of the weekly bond purchase also weigh on the US dollar, by the way of firmer Euro.

Moving on, the final reading of Australia Retail sales for July, up for publishing at 01:30 AM GMT, is expected to improve from the previous -2.7% and can direct immediate AUD/USD moves. While the risk-on mood may get an additional boost should the Aussie data improve and virus numbers recede, helping the pair to rise further, cautious sentiment ahead of the US Nonfarm Payrolls (NFP) may restrict the market moves going forward.

A clear upside break of a 10-week-old falling trend line and 50-DMA, respectively around 0..7290 and 0.7375, enables the AUD/USD bulls to attack a yearly horizontal hurdle surrounding 0.7410-15.

Event Risk Data Today

Australia: Retail Sales (July)

China: The August Caixin services PMI is set for release, with disruptions from COVID-19 restrictions expected to impact (market f/c: 52.0).

Euro Area: Services spending is anticipated to progressively take over from goods spending as the driver of total consumption.

US: The market expects a Non-Farm Payrolls gain of 725k for August as strong demand for labour persists. The market forecast for August unemployment is 5.2%; volatility in participation is a risk to the upside for the unemployment rate. Average hourly earnings are likely to rise 0.3% in August as wage pressures remain concentrated in low-skilled areas. The August ISM non-manufacturing index should show underlying demand remaining strong, despite services being at risk from delta (market f/c: 61.8).

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