The Australian dollar has posted considerable gains on Monday. Currently, AUD/USD is trading at 0.7342, up 0.48% on the day.
US Nonfarm payrolls miss consensus
On Friday, US nonfarm payrolls underperformed for a second successive month. The September reading of 194 thousand was well off expectations of 500,000-plus, but the sky didn’t fall on the financial markets, and the reaction on the currency markets was muted. In fact, the Australian dollar was almost unchanged on Friday.
One reason for the calm was that the unemployment rate fell to 4.8%, down sharply from 5.2% beforehand. In the minds of investors, the Fed taper is on, likely in December. That start date, which hasn’t been confirmed by the Fed, could be delayed, of course. If key economic data were to deteriorate significantly, that could cause Fed policymakers to hold off a taper until early next year. However, unless things really fall apart, the Fed should be good to go with a taper at the December meeting.
Is the Australian business sector any more optimistic about the economy? We’ll get an answer on Tuesday, with the release of the NAB Business Confidence index for September. The past two readings have shown a decline, as prolonged lockdowns have taken a toll on economic activity and hurt confidence. Another negative read could see the Australian dollar retrace today’s gains.
The RBA released its semi-annual Financial Stability Review on Friday. The report focused on the risks due to the surge in housing prices and the rise in borrowing levels, which has been made possible by ultra-low interest rates, and the RBA warned that lending standards must be maintained in order to reduce risks to financial stability. RBA Governor Lowe has faced criticism for opting to leave rates on hold while the housing market is red-hot, but Lowe says he first wants to see stronger inflation and wage growth before raising rates.
AUD/USD Technical
- AUD/USD is putting strong pressure on resistance at 0.7356. Next, there is resistance at 0.7403
- The pair has support at 0.7244. Below, there is support at 0.7177