The Australian dollar has extended its gains and is in positive territory for a third consecutive day. Currently, AUD/USD is trading at 0.7406, up 0.52% on the day. The pair is currently at its highest level since August 5th and is up 1.19% on the week.
Will Australia Retail Sales rebound?
Australia Retail Sales faltered badly in June, with a reading of -2.7%. We’ll get a look at the July reading on Friday. Another sharp decline could put an end to the Aussie’s current rally. Australia continues to grapple with Covid-19, with the Delta variant causing a record number of cases. The economy has been hit by the double blow of soft domestic activity and tepid global demand, and that nasty term ‘recession’ is already being bandied about as investors fret about the economy. Still, it’s important to remember that Australia’s Covid numbers are relatively low, and once this Covid wave is contained, the economy will improve.
All eyes are on US Nonfarm Payrolls, which will be released on Friday. Investors are a bit more cautious after some disappointing US data on Wednesday – the ADP Employment report missed the forecast by almost half, while the ISM manufacturing employment sub-index fell into contraction territory. Granted, the ADP is not a reliable indicator of NFP, but such a massive miss has understandably raised eyebrows about the strength of the labor market. It will be interesting to see if the consensus of 750 thousand is on target – an overperformance will trigger speculation about an imminent Fed taper, while a massive miss would likely delay a taper. This means that we could see significant movement from the US dollar on Friday.
Later in the day, Fed members Raphael Bostic and Mary Daly will deliver speeches. Bostic is hawkish and recently said it was “reasonable” to commence tapering in October. Day is viewed as more of a centrist, so if her remarks indicate a move in either direction, the markets, and the US dollar could respond.
AUD/USD Technical
- AUD/USD is testing resistance at 0.7377.Next, there is resistance at 0.7455
- There are support levels at 0.7182 and 0.7055
