The US Employment data has come and went with the US adding a total of 209K jobs, the Unemployment Rate moved up to 6.2%. Hourly earnings were unchanged. Overall, it was a little weaker than expectations, but it was not too weak to change anything for the Fed with regard to the winding down of the QE taper (2 more meetings and the Fed will finally be stopped adding to the Feds balance sheet). However, it was not too strong to think there might be a speeding up of the Fed tightening process. There might be debate between those that think the Fed is behind the curve (led by Fed's Posen and Fisher),but the ease camp
This will likely keep traders clinging to the economic data and events. This week the focus shifts from the US to the other countries. The highlight will be the ECB meeting on Thursday.
Below are the highlights and potential impact from my perspective:
Monday: The Australian Retail Sales for the month of June came in better at +0.6% for the month. May was revised up but remained negative at -0.3% versus -0.5%. For the QoQ ex Inflation, the Retail Sales were down -0.2%. Although better than expectations, it is still a negative. Later on Monday night (Tuesday in Australia), the Trade data for the month of June will be released with the expectations of -2000M deficit. Last month, the deficit came in at -1911 and in April it was -780M. This reversed the three surplus months that occurred in the first quarter. This is negative for GDP growth in Australia and should be negative for the AUD. The AUD USD is trading just below the 100 day MA at the 0.9329 level (current price is 0.9313). This level will be eyed for bullish or bearish clues in trading this week. Continue to stay below and the bears remain in control. If it is able to move back above this level, there could be further upside corrective potential.
Tuesday: Continuing the Austalia theme, on early Tuesday morning in the US (at 12:30 AM ET/ Wednesday in Australia), the Reserve Bank of Australia will likely announce that they will keep rates unchanged at 2.5%. At the last meeting on July 1st, the statement from the RBA said that they expected slower export growth. They described the consumer growth as "moderate", and said that the investment spending in the resource sector "is starting to decline significantly". They added that other firms are "tentative" to increase investement spending until they see "more evidence of improved conditions" and that there were some "Improvement in indicators for the labor market in recent months, but it will probably be sometime before unemployment declines consistently". They concluded the statement by saying that the "most prudent course is likely to be a period of stability in interest rates". That attitude is likely to continue in this months statement and should see the Australian dollar remain somewhat under pressure.
PS. The market traders will be keen to any comments about the value of the Australian dollar. In particular, they will be watching for any attempts to talk down the value of the currency. If the price of the AUDUSD should move lower, the key target on the downside is the 0.9181 area where the 200 day moving average and 38.2% retracement of the year's trading range are both found.
Also on Tuesday, the UK Services PMI will be released (at 4:30 AM ET) with expectations of the index coming in at 58.0 vs 57.5, and in the US the ISM Nonmanufacturing PMI index will be released with expectations of a rise to 56.5 from 56.0. On Friday, the Manufacturing ISM index rose strongly to 57.1 from 55.3. This was a highest level since April 2011.
The GBPUSD has been falling steadily since peaking in mid July, and the price fell below the 100 day MA at the 1.6859 level in last week's trading. Stay below this level and the bears will have the upper hand with a move toward the 200 day MA at the 1.6629 level a key target (current price is 1.6832)
Wednesday: The highlights on Wednesday will be Trade data at of the US and Canada at 8:30 AM ET. In the US. The expectation is for a trade deficit -44.9 billion in the US while in Canada, the estimate is for an unchanged trade picture for the month of June. The 2nd quarter GDP in the US released last week (+4.0% better than expectations of 3.0%) showed that trade subtracted from GDP growth. In that release is an estimate for the June trade data. If the actual value is materially better or worse than expectations, economists will be adjusting the 2nd quarter GDP accordingly.
Later in the day, the Australian employment will be released at 9:30 PM ET with expecations for Unemployment Rate to remain near high levels of 6.0% with an addition of 13.2K jobs
Thursday: On Thursday the most important event will be the ECB interest rate decision and press conference. The ECB announced stimulus measures in June with the so called LTRO program not being implemented until September. With the easing in the pipeline, the ECB has stated that they would like to see the impact of these moves before acting again. However, at the same time, the ECB has stated that they are exploring other Quantitative Easing stimulus measures, and ECB President Mario Draghi will likely remind the market of this fact. This should keep the euro under pressure. Technically, a move below the 1.3375 level in the EURUSD (midpoint of the move up from the July 2013 low), would be supportive of a more bearish move in the pair with the potential of an extension toward the 1.3300 (low from November 2013) and 1.3225 target levels (61.8% of the move up from July 2013 low).
Friday: The Bank of Japan is expected to keep rates unchanged at their policy meeting. Bank of Japan's Kuroda seems content with the overall progress of the stimulus measures. However, the market will be paying attention to any shifts in tone from his statement and comments.
Canada will release their July employment statistics for the unemployment rate expected to remain unchanged 7.1% and the net change in employment expected to show a gain of 24.0 K vs. the surprise decline of -9.4 K last month. Since the US employment report has already been released, the Canada employment report will be center stage (typically, the US report is released concurrently and tends to influence the market more). Should the report continue to show weakness, look for a move back above the 1.1000 level in the USDCAD. Last week, the price moved above the 100 day moving average – currently at 1.0887. This moving average level will be eyed as support for traders this week. Stay above bullish. Move below and look for further corrective selling.
Good fortune with your trading.
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