Gold and risk sentiment moved the Aussie around last week. Will they continue to dictate its price action this week?
Here are the events you need to watch:
Labor market numbers (Aug. 16, 1:30 am GMT)
A net of 50,900 workers had found jobs in June, which marked the strongest increase in November 2017.
The report detailed more strength: labor market participation rate rose and there were more full-time jobs filled than there were for part-timers.
The increase in full-time work and participation rate will be well-received by the Reserve Bank of Australia (RBA), which is worried that a slow wage growth is outpacing household debt increases.
This week analysts see the net job gains chilling to only 15,300 while the unemployment rate is expected to steady at 5.4%.
More gains could push the Aussie higher, while a reversal of some of last month’s gains could drag on the comdoll on the day of the release.
Global trade concerns
What’s a trading week without concerns about escalating U.S.-China trade war?
This week all eyes will be on the U.S. to see if it will respond to China’s tit-for-tat tariff plans by printing ANOTHER list of Chinese goods to place duties on.
Oh, and don’t forget about other economic concerns! The dramatic decline of the Turkish lira has already spurred contagion fears in the Asian markets.
Meanwhile, last week’s brouhaha over the Russian rouble has led Russia’s Finance Minister to reveal that Russia will further decrease its investments in the U.S. economy and securities. Duhn duhn duhn duhn.
Last Week’s Price Review
The Aussie is having a bad run this week since it’s currently in third-to-last place (as of 6:00 am GMT).
The Aussie’s price action looks kinda messy at first glance. We do get a clearer picture is we remove AUD/NZD from the overlay, though.
As y’all can see, the Aussie is still taking directional cues from gold prices. However, risk sentiment and trade-related news also had an impact on the Aussie’s price action.
Anyhow, the Aussie had a mixed start, likely because gold prices were falling but risk-taking prevailed.
Aussie pairs began tilting broadly to the upside come Tuesday, though, likely because of another bout of risk-taking and rising gold prices. The Aussie’s rally did eventually stall during Tuesday’s U.S. session, though, likely because gold prices were dampening demand for the Aussie.
As a side note, the RBA announced its latest monetary policy decision on Tuesday. However, the event didn’t appear to have much of an impact on the Aussie, likely because the RBA held the cash rate steady (yet again) and hinted that rates ain’t moving anytime soon, while also refraining from talking down the Aussie and presenting a generally upbeat assessment and outlook for the economy.
Moving on, gold prices would find support and turn higher late into Tuesday’s U.S. session and then continue to do until Wednesday’s Asian session.
However, most AUD pairs had a tough time tracking gold prices higher, likely because of trade-related jitters due to news that the U.S. has confirmed that it will push through with plans to impose a 25% tariff on $16 billion worth of Chinese goods, effective August 23.
Bears would later win out when gold prices fell during Wednesday’s London session, delivering a final bearish kick when China announced tit-for-tat tariffs of its own, also effective on August 23.
Oddly enough, selling pressure quickly abated when the U.S. session rolled around, likely because gold prices were turning higher again and the Greenback was on the back foot at the time.
At any rate, the Aussie got a final bullish kick when China’s CPI numbers came in better-than-expected.
That was the last hurrah from Aussie bulls, though, since AUD pairs began to turn broadly lower after that, likely because risk aversion continued to ramp up and gold prices eventually turned lower again.
And selling pressure didn’t really let up since gold prices continued to trend lower and risk aversion was still the name of the game as of Friday’s Asian session. Moreover, the Greenback was broadly in demand, which very likely added to the Aussie’s woes.
As another side note, the RBA released its Statement on Monetary Policy on Friday. And that didn’t really provide much support for Aussie bulls.
Sure, the RBA reiterated its forward guidance that a rate hike is more likely when it stated that:
“Higher interest rates are likely to be appropriate at some point, if the economy continues to evolve as expected.”
However, the RBA also repeated its other forward guidance that rates ain’t budging anytime soon when it stated that:
“[T]he Board does not see a strong case to adjust the cash rate in the near term.”