Market Awaits US Jobs Data, While RBA To Stay Put

NZD got off to a good start for December after an impressive rise in New Zealand terms of trade, which climbed to 7.5 percent in the third quarter from 4.7 percent in the second quarter (2.9 percent expected). While the rise in NZDUSD had reached resistance at about 0.8200 at the time of writing, the pair looks subdued below 0.8250 from the November downtrend. Key US data this week should guide direction for USD after some mild profit-taking last week.

China manufacturing PMI for November was unchanged at 51.4, but came out ahead of market expectations of 51.1. China's HSBC Manufacturing PMI also beat expectations at 50.8 for November.

AUDUSD was also higher and climbing towards 0.9160 on better China data, but it will likely continue a lower trend with the kiwi. Australia’s PMI for November slipped to 47.7 from 53.2, which could weigh on domestic concerns.

RBA focus
The Reserve Bank of Australia’s (RBA) rate decision on Tuesday will be a key focus, but the market expects no change in the official cash rate (OCR) of 2.5 percent. The RBA will likely remain in wait-and-see mode for some time as economic data begins to reflect the low-rate environment. Building activity and housing continue to remain strong, but weakness in the labour market and a bleak outlook for the mining sector will keep the RBA’s dovish tone intact. If productivity gains continue into 2014 and the labour market improves, the RBA will be cautiously optimistic given risks in China and negative implications for terms of trade; this will delay the decision to raise the OCR towards the second half of next year.

Key US data
The market expects a pickup in the final US Q3 GDP estimate to 3 percent from 2.8 percent annualised. The Q3 GDP report will likely show solid improvement before the US government shutdown occurred in October. But the forecast for non-farm payrolls (NFP), to be released on Friday, is less positive, with the market expecting it to decline to 183,000 from 204,000, which could cause some concern. The previous NFP figures were positive with upward revisions, but some reports about weaker hiring activity for the Thanksgiving holiday could be a negative factor. Retailers are expecting weaker holiday spending as US consumers search for discounts.
USDJPY focus
USDJPY is data dependent, so expect some action this week. The pair still looks elevated, but it will need to remain above 102 from here. Higher lows could remain, but a lot rests on US data this week. The 102.50 resistance level is in play and could pave the way towards 103 depending on USD performance.

JPY selling from last week created a nice opportunity for traders to take profit from USDJPY highs. Japan reported weaker economic data, but CPI continued to increase. Bank of Japan governor Haruhiko Kuroda will speak on Saturday.