AUDUSD Vulnerable Amid Backlog Of US Data

The US data calendar picks up this week after the government shutdown caused reporting delays. On Monday, the market expects a decline in US existing home sales for September. Much of the focus will be on Tuesday’s employment data, with consensus for a 19,000 gain in non-farm payrolls in September.

USD positioning
USD declined during the past week, but we could see some positive positioning ahead of the heavy US data calendar. USDJPY continues to struggle near 98.00, but could find some support if it maintains higher lows from last week.

Look for another dip in AUDUSD
AUDUSD is the most vulnerable as it continues its rebound off summer lows. The rise in AUDUSD is poised for another pull-back this week, but it could be a nice buying opportunity on the dip.

We could see a pull-back in AUDUSD towards 0.9500 if US data comes out better than expected. This will be a healthy decline to sustain the rebound. The previous downtrend was inspired by a dovish Reserve Bank of Australia (RBA) and heightened expectations for the Federal Reserve to taper asset purchases which pressured AUDUSD below parity, but sentiment is starting to shift on both fronts.

Currently, the less dovish Reserve Bank of Australia (RBA) is likely to support the rise in AUDUSD. Stronger economic data from China is also lending support for AUD. Aussie employment data are finally showing signs of improvement, but inflation is still weak.

Aussie CPI ahead
Australian CPI data will be released on Wednesday, and the market is expecting an increase of 0.8 percent for Q3, but a decline to 2.1 percent in the trimmed mean figure year-over-year which is watched closely by the RBA. The June quarter CPI report showed a rise of 0.4 percent, but was largely affected by increases in medical and hospital services.

Aussie private health fund premiums increased in April, so we can expect a lesser impact in Q3 CPI. If the health group continues to be offset by a decline in pharmaceutical products, we should lend greater focus on the housing group which is showing greater strength.

The Q3 inflation report will probably be mixed, albeit slightly below market expectations.

AUDUSD still looks supportive, so continue to watch how the pair performs this week.