‘BUCKLE UP‘: Why it could be a wild session for the Australian dollar

Oleg Nikishin/Getty ImagesBoom!

  • The Australian dollar stabilised on Thursday, finishing mixed against the crosses.
  • The AUD/USD continues to receive support on any dip towards the .7150 level.
  • New US tariffs on Chinese imports could be announced as soon as today. US non-farm payrolls for August will also be released.

The Australian dollar stabilised on Thursday, finishing mixed against the crosses.

Here’s the scoreboard as at 7am in Sydney.

AUD/USD 0.7197 , 0.0008 , 0.11%
AUD/JPY 79.69 , -0.49 , -0.61%
AUD/CNH 4.9257 , 0.0064 , 0.13%
AUD/EUR 0.6190 , 0.0008 , 0.13%
AUD/GBP 0.5567 , -0.0003 , -0.05%
AUD/NZD 1.0921 , 0.0015 , 0.14%
AUD/CAD 0.946 , -0.0022 , -0.23%

After opening the day below the .7200 level, the AUD/USD climbed higher in Asian trade on the back of broad-based US dollar weakness.

However, news that ANZ and Commonwealth banks will increase variable mortgage rates for their customers, joining Westpac in announcing out-of-cycle hikes, saw the Aussie tumble back below the .7200 level late in the Asian session.

By lifting rates independent of the Reserve Bank, this is a tightening of financial conditions, lessening the need for the official cash rate to increase for the foreseeable future. Some would even argue it should warrant a possible cut from the RBA.

“Even with this latest rise, the average discounted variable home loan rates still sits below where it was in 2016 after the RBA last lowered the cash rate, hence the RBA has remains comfortable peddling the line that the next move in rates is likely to be up,” said Ray Attrill, Head of FX Strategy at the National Australia Bank.

Along with another late selloff in Chinese stocks — souring sentiment across the region — that saw the AUD/USD fall back towards 20-month lows struck on Wednesday.

InvestingAUD/USD Hourly Chart

After falling to session lows in early European trade, the Aussie recovered later in the day, climbing back above .7200 before running into renewed selling.

Providing another explanation as to why the Aussie’s selloff has stalled in recent days, the AUD/USD is continuing to find technical support above .7150, a level it has bounced off several times in the past.

The daily chart below certainly makes the case.

InvestingAUD/USD Daily Chart

There was little market reaction to a raft of major US economic data overnight as beats for ISM non-manufacturing PMI and initial jobless claims was offset by misses on factory orders, ADP private sector employment and labour costs.

Against the crosses, the Aussie lost ground against the Japanese yen, largely reflecting the risk-off tone in stocks seen during the session.

Helping to explain why nerves remain elevated, the period of public consultation on proposed tariffs on $US200 billion worth of Chinese imports entering the United States has now come to an end, opening the door for them to be implemented as soon as today.

“Source stories last week were suggesting Trump would announce his intention to proceed as soon as the consultation period was over. So buckle up and watch this space,” Attrill at the NAB says.

Even if that doesn’t eventuate, it will still be a busy session for traders in the second half of the session with the release of US non-farm payrolls for August.

Payrolls are tipped to lift by 198,000 seeing the unemployment rate fall from 3.9% to 3.8%. Average hourly hourly earnings — perhaps the most important part of the payrolls release now — are seen rising by 0.2% leaving the change on a year earlier at 2.7%, the same level reported in July.

It will arrive at 10.30pm for those Australians living in the eastern states.

Before it hits, markets will also receive Australian construction PMI and housing finance figures at 8.30am and 11.30am AEST respectively.

Other highlights today include Japanese household spending, German and French trade and industrial orders, revised Q2 Eurozone GDP along with Canadian unemployment.

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