Fundamental Analysis

AUD/USD in Focus ahead of Aussie Jobs, Chinese Industrial Production and US CPI Data

Typography

Key data from Australia and China will be released in the early hours of Thursday, followed by inflation figures from the US later on in Thursday's session. Thursday's data releases could have a big impact on the Aussie dollar, especially the AUD/USD pair.

From Australia we will have the latest monthly jobs report. Last month saw seasonally-adjusted employment increase by 27,900 in July. The increase looked impressive but the detail of the jobs report revealed that the rise was actually due entirely to a sharp increase (48,200) in part-time jobs. In fact, full-time employment decreased by 20,300, no less. So, the first thing we want to see is a rise in full-time employment for the month of August, otherwise the Australian dollar could be in trouble. A good headline figure above the expected 17,500 could send the Aussie sharply higher. The unemployment rate is expected to have remained unchanged at 5.6 per cent.

Meanwhile from China, industrial production will be among the main data releases there. Industrial output slowed down unexpectedly sharply last month from 7.6% to 6.4% year-on-year. But in August, it is expected to have rebounded to 6.6%. Anything less than this could spook investors about the health of the world's second largest economy. Now China is Australia's largest trading partner. So what happens in China is important for Australia as, for example, a downturn could hit the latter's exports.

Thursday will also see the release of US CPI, which makes it a very important session for the AUD/USD, given abovementioned data releases from Australia and China. US CPI is seen rising 0.3% month-over-month with the year-over-year figure expected to climb to 1.8% from 1.7% previously. If US inflation turns out to be hotter than anticipated then one would expect the dollar to rise as the probability of another Federal Reserve interest rate rise increases. Conversely, a disappointing figure could halt the current dollar rebound as that may put an end to expectations of another rate increase this year.

Ahead of the abovementioned data, the AUD/USD has created what looks like a potential reversal formation, although at this stage none of the key support levels have broken down yet to suggest the top is in. As can be seen from the chart, since the formation of the inverted hammer candle and the subsequent failure of price to hold above the previous 2017 high of 0.8060/5, the AUD/USD has been largely out of favour. It has pulled back to within its existing range ahead of the key data releases. But so far, price has managed to hold above the point of origin of the breakout around the 0.78210/30 area. Only when the Aussie breaks below here, will the uptrend technically be over as we would then have our first lower low in place. So, for now, any pullback will have to be viewed as just that – a pullback in what still is a bullish trend. Indeed, any move back above the 0.8040-0.8065 area would re-confirm the bullish trend.

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