Will Aussie bulls maintain their momentum this week? Let’s take a look at potential catalysts that could affect the comdoll’s price action.
Employment reports (Dec. 20, 12:30 am GMT)
Australia’s labor market numbers made the bulls happy after they saw better-than-expected numbers in net job addition, unemployment rate, AND labor participation rate for the month of October.
On Thursday, analysts expect to see net job additions whittle down from 32,800 to 20,000 while the unemployment rate is estimated to maintain its 5.0% reading.
Take note, however, that unlike in last month’s release, we also have big catalysts (read: BOJ’s statement) to potentially rock the market boat.
Make sure you consider other big events when making trading plans for this release!
Market risk sentiment
Progress in the U.S.-China trade negotiations made a lot of Aussie bulls happy last week. Question is, will U.S. and Chinese reps keep the headlines coming to extend the Aussie’s gains?
Aside from global trade-related updates, other catalysts such as central bank decisions, Brexit updates, and Uncle Sam’s top-tier reports could also affect the high-yielding Aussie’s price action.
Last Week’s Price Review
After finishing in last place last week, the Aussie was able to stage a broad-based recovery this week and is currently on track to closing out the week in second place (as of 7:00 am GMT).
As always, the Aussie took some directional cues from gold prices. But like last week, other factors were in play since gold is in negative territory for the week, but most AUD pairs are trading above last week’s closing prices (dashed, horizontal line).
And this week, the Aussie got a bullish boost from the prevalence of risk-taking, due mainly to signs of progress in trade talks between the U.S. and China.
AUD pairs opened the week by gapping lower, thanks to a warning from the OECD that the Australian government should “prepare contingency plans” for a possible housing market crash.
Fortunately for the Aussie, Australia’s housing finance report was released and showed that home loans surged by 2.2% in October, which eased fears of a housing market crash and allowed the Aussie to close the weekend gaps.
There also appears to have been some follow-through buying since the majority of AUD pairs kept pushing higher even as gold prices fell and risk aversion prevailed.
Anyhow, gold prices began turning higher and there were signs of returning risk appetite during Monday’s U.S. session, so the Aussie’s rise became more broad-based.
Things only got better for the Aussie during Tuesday’s Asian session since China’s Commerce Ministry shared that Vice Premier Liu He had a telephone conversation with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer, and that:
“Both sides exchanged views on putting into effect the consensus reached by the two countries’ leaders at their meeting, and pushing forward the timetable and roadmap for the next stage of economic and trade consultations work.”
The Aussie also had a good time during Tuesday’s London session, thanks to the risk-friendly vibes in Europe and a Bloomberg report which claimed that a proposal to slash the tariffs on imported U.S. cars from 40% to 15% has supposedly been “submitted to China’s Cabinet to be reviewed in the coming days.”
Unfortunately, risk aversion returned and gold prices dipped during Tuesday’s U.S. session, so the Aussie’s gains were capped.
Fortune would smile on the Aussie again, though, since Trump was interviewed by Reuters just before Wednesday’s Asian session rolled around and Trump showed optimism that a trade deal with China can be hammered out and that he’s ready to intervene in the arrest of Huawei CFO Meng Wanzhou if he thinks it’s “necessary”, while also saying that it would be “foolish” if the Fed hikes next week.
However, follow-through buying was only limited and the Aussie even began to drift lower on many pairs, likely because gold prices were slipping again and because demand for the Aussie was dampened by the risk events on Wednesday, namely the leadership challenge against Theresa May and budget talks between the E.U. and Italy.
Those risk events didn’t end badly, so risk-taking resumed during Thursday’s Asian session, giving AUD bulls got their second wind.
That was the last hurrah for AUD bulls, however, since risk aversion returned and gold prices slipped during Thursday’s London session.
AUD bulls kept fighting back but their resilience eventually cracked since risk aversion was still the name of the game during Friday’s Asian session.