- Markets were fairly well contained overnight, looking ahead to the key event this week – Fed Chair Powell’s testimony to Congress, which may provide clues to a rate cut at month-end.
- US 2yr treasury yields nudged higher to 1.89% - 1bp above Friday’s high, while 10yr yields ranged sideways between 2.01% and 2.04%. Markets are now pricing 29bp of easing at the July meeting (from 27bp yesterday).
- Australian 3yr government bond yields ranged between 0.92% and 0.94%, 10yr yields between 1.32% and 1.35%. Markets are pricing only a 15% chance of an RBA rate cut in August.
- The US dollar index is up 0.1% on the day, with most majors consolidating Friday’s declines vs the USD.
- EUR eked a narrow range, probing the downside at 1.1207.
- USD/JPY extended Friday’s rally to 108.75 – a one-month high.
- AUD slipped from 0.6994 to 0.6967.
- NZD similarly slipped from 0.6653 to 0.6621.
- AUD/NZD ranged between 1.0510 and 1.0525.
AUD/USD stays in consolidation channel below 0.7000
- ANZ Job Advertisements rebound strongly in June in Australia.
- US Dollar Index preserves Friday's NFP-inspired gains.
- Choppy FX action is likely to continue in the remainder of the day.
The AUD/USD pair, which closed the week below the 0.7000 mark after losing 40 pips on Friday, is staying relatively quiet on Monday in the absence of fundamental drivers. As of writing, the pair was posting small daily gains at 0.6985.
Last Friday, the U.S. Bureau of Labour Statistics reported that nonfarm payrolls in June increased by 224,000 to beat the market expectation of 160,000 by a wide margin. With the strong jobs data forcing investors to reassess the probability of multiple Fed rate cuts in the remainder of the year, the greenback gathered strength and the US Dollar Index rose to its best level in two weeks at 97.44 before retreating slightly and finishing the week at 97.17.
On Monday, the US Dollar Index seems to be having a tough time setting its next short-term direction and continues to move sideways near 97.30, not allowing the pair to climb above the 0.70 mark.
Earlier in the day, the ANZ Job Advertisements came in at +4.6% in June following May's 8.2% decline but the AUD didn't pay any attention to this data. Today, the National Bank of Australia will publish the Business Confidence and Business Conditions indexes.
AUD/USD is trading below 0.6980 resistance and the 50 SMA. If sellers can trade below 0.6958 they could reach 0.6907 to the downside, according to the Technical Confluences Indicator.
Event Risk Data Today
- Australia: Jun NAB business survey will be closely watched for a possible post rate cut and Federal election bounce. Previously in May, conditions declined 2pts to a well below average +1.
- US: Jun NFIB small optimism was last at 105.0, indicating a continued high level of optimism. Fed Chair Powell delivers opening remarks (15 min) via video at the Boston Fed’s stress testing conference where Quarles is also due to present the keynote speech. Other Fedspeak involves Bullard and Bostic at the OMFIF conference at Washington University.