s/l orders raised, comment AUD, NZD, GBP, USD
The AUD has drifted higher ahead of the employment data, despite weaker EUR and mixed em currencies. NZD and CAD modestly firmer.
There is little going on in last 24hrs, so much of this is position adjustment.
A weaker EUR is consistent with a long EUR market wary of dovish comments from ECB.
The market is short JPY, so it is firming.
The market is probably not particularly long AUD, is scrambling a bit having witnessed a breakout above past highs.
The employment report is a risk. After the fastest three-months of employment gains since 2004, mean reversion may see jobs fall today. But then again, employment growth was perhaps surprisingly weak in the year up to Feb, and we have just had a payback for earlier weakness. The more recent uplift in jobs may be a belated response to stronger forward-looking indicators The employment number can be quite volatile and virtually anything is possible, but mean little.
The unemployment rate tends to be more reliable. The market is looking for a tick up, after its recent sharp move lower over two months from 5.9 to 5.5%.
How will the market respond to these data, beyond the knee-jerk response? I’d guess there is a bias to buy dips still.
The expectations for the data are quite robust and imply that the economists see a good part of the resurgence in the labour market as a fresh trend. As such, if the data meet expectations it should support the notion that the Australian economy is rebalancing more quickly and build the case for rate hikes later this year.
Will we get pushback from RBA speakers? Where was RBA’s Heath that spoke yesterday? I have seen no stories on this?
It appears we have seen a soft push back from some press commentators, McCrann, James Glynn, reporting on Board Member Ian Harper. However, the pushback is against hikes in coming months, not later this year. This appears a soft push back. If that is all RBA insiders and members are willing to say, it will only tend to boost expectations of a hike later this year.
After the surge in AUD from 0.76 to 0.79 in just over a week, it may be over-bought on short term charts and vulnerable to a correction. 14-day RSI at 78.75, a high in 5-years.
But the AUD has arguably broken into an uptrend after a long sideways consolidation. So an over-bought condition may be resolved by more gradual rangey rising price action.
The doubts about the capacity of the AUD to rise towards 0.85 might still relate mostly to its housing market risks and China financial risks. China could be heading back into tackling its excesses in credit creation, we need to vigilant of this. Banks may still be gradually tightening credit on housing. However, as we have noted in recent reports, iron ore prices are stronger and housing market indicators are stronger.
I have taken out the t/p on AUD/NZD. Upside potential is possibly greater as we head towards NZ election. Low inflation outcome delays pressure to higher NZ rates. Stronger global and Australian growth may start to press down on NZ immigration. Australian trade balance has moved into surplus, NZ trade balance is a significant deficit. Reports in NZ are that lake levels are low, an issue for energy production. I am inclined to add to AUD/NZD long position.
I am bearish GBP. Brexit negotiations are fraught, UK politics are in disarray. Business confidence and investment are likely to falter. I prefer to sell against EUR, but market long EUR, so watching for now.
I am bearish USD. The credibility of Trump is falling. Internationally it appears global leaders have manipulated him and he appears out of his depth. Domestically his speeches on policy sound more hollow. Business confidence in the US may suffer. Fed hikes appear to be slipping out of view.
Position
Long half unit AUD/NZD at 1.0553; 1.0693; (s/l raised, t/p removed)
Long AUD/USD at 0.7790; s/l 0.7773; t/p .8478 (s/l raised)
Long AUD/USD at 0.7929; s/l 0.7845; t/p o.8478 (s/l raised)