While the US data calendar is expected to be light this week due to the government shutdown, the lack of negotiation and failure to compromise among US lawmakers as they approach the final days until the debt ceiling cut-off on October 17 should continue to guide the USD lower.
What's going on in the US?
We could see another repeat of the previous year as the US Senate and House of Representatives wait until the final hour to agree on raising the debt ceiling. Perhaps passing a continuing resolution bill based on a fiscal framework encouraged by Republicans could compensate for a delay in fighting against the Affordable Care Act. A resolution on that front could put a stop to the government shutdown and pay the bills.
Despite making little progress so far, a grand compromise is likely as we approach the deadline. Remember, the US has a bad habit of kicking the can down the road with anything related to fiscal responsibility.
The US Treasury will still have enough money collected from tax receipts to pay interest on debt, and by law, debt service will be top priority, which means that all other spending will be trimmed. The bottom line is that it’s not as scary as the current administration makes it seem — politicans are just saving themselves for the coming backlash against the inevitable spending cuts needed in order to cater to bondholders; something that seems to be dismissed in all previous debates surrounding the decision to raise the debt limit.
In FX, USD is expected to continue lower amid the US political debacle, which makes AUDUSD and USDJPY interesting pairs to watch.
Aussie employment data ahead
The Federal Open Market Committee (FOMC) September minutes will be released on Wednesday. On Thursday, Australia consumer inflation expectations and employment data will be released. The market is expecting the Aussie unemployment rate to remain stable at 5.8 percent, with 15,000 jobs added in September from the 10,800 drop in employment in August.
Again, the underlying data of full-time and part-time labour will be important to watch. The recent trend showing an offloading of part-time workers could slow down as businesses pick up hiring. The latest job vacancies data was better, so we could see a positive employment change for September. This could keep AUD supported, as the chart below shows.
AUDUSD was weighed down from the 0.9450 resistance level during the Asia session, but it still looks supportive off 0.9300. A good employment print should keep the uptrend going, but a miss will add pressure towards 0.9350. However, further USD weakness could keep the pair elevated off late September lows.
Japan stalls on stimulus
Meanwhile, USDJPY continues to slip through 97.50. The USD fatigue following USDJPY’s short stint at the psychologically important 100 level is still in effect, and the Fed’s decision not to taper asset purchases added further weight to the downside.
Prospects of ongoing Japan stimulus continues to linger, but the market is still focused on USD action. Japan’s Prime Minister Abe announced his decision to raise the sales tax, but stimulus measures to offset the negative effect on the economy are still being discussed. The lack of swift follow-through on Abe's stimulus ideas could be contributing to a higher JPY.
For now, USDJPY approaches some support zones, but the declining channel could hold for a while.
What's going on in the US?
We could see another repeat of the previous year as the US Senate and House of Representatives wait until the final hour to agree on raising the debt ceiling. Perhaps passing a continuing resolution bill based on a fiscal framework encouraged by Republicans could compensate for a delay in fighting against the Affordable Care Act. A resolution on that front could put a stop to the government shutdown and pay the bills.
Despite making little progress so far, a grand compromise is likely as we approach the deadline. Remember, the US has a bad habit of kicking the can down the road with anything related to fiscal responsibility.
The US Treasury will still have enough money collected from tax receipts to pay interest on debt, and by law, debt service will be top priority, which means that all other spending will be trimmed. The bottom line is that it’s not as scary as the current administration makes it seem — politicans are just saving themselves for the coming backlash against the inevitable spending cuts needed in order to cater to bondholders; something that seems to be dismissed in all previous debates surrounding the decision to raise the debt limit.
In FX, USD is expected to continue lower amid the US political debacle, which makes AUDUSD and USDJPY interesting pairs to watch.
Aussie employment data ahead
The Federal Open Market Committee (FOMC) September minutes will be released on Wednesday. On Thursday, Australia consumer inflation expectations and employment data will be released. The market is expecting the Aussie unemployment rate to remain stable at 5.8 percent, with 15,000 jobs added in September from the 10,800 drop in employment in August.
Again, the underlying data of full-time and part-time labour will be important to watch. The recent trend showing an offloading of part-time workers could slow down as businesses pick up hiring. The latest job vacancies data was better, so we could see a positive employment change for September. This could keep AUD supported, as the chart below shows.
AUDUSD was weighed down from the 0.9450 resistance level during the Asia session, but it still looks supportive off 0.9300. A good employment print should keep the uptrend going, but a miss will add pressure towards 0.9350. However, further USD weakness could keep the pair elevated off late September lows.
Japan stalls on stimulus
Meanwhile, USDJPY continues to slip through 97.50. The USD fatigue following USDJPY’s short stint at the psychologically important 100 level is still in effect, and the Fed’s decision not to taper asset purchases added further weight to the downside.
Prospects of ongoing Japan stimulus continues to linger, but the market is still focused on USD action. Japan’s Prime Minister Abe announced his decision to raise the sales tax, but stimulus measures to offset the negative effect on the economy are still being discussed. The lack of swift follow-through on Abe's stimulus ideas could be contributing to a higher JPY.
For now, USDJPY approaches some support zones, but the declining channel could hold for a while.