After trading in a tight range for much of the morning, the Aussie dollar has advanced this afternoon and currently testing the uppermost part of the 106.50 / 107.95 range. The local unit hit a near 4-week high overnight with price action making a temporary break of 107 US cents before making an orderly retreat through the latter part of US trade earlier this morning. Nevertheless, it appears we have some reasonable intra-day support built around 106.5 US cents and we expect price action to adhere to this support for the remainder of Asian trade. At the time of writing the Aussie dollar is buying 106.9 US cents.
The theme of US dollar weakness - for the most part - persisted overnight with broad losses against major counterparts. True to form, it's all about Fed stimulus expectations with market participants speculating in what way, shape or form another round of stimulus may come. The FOMC minutes released overnight showed members were divided over the appropriate course of action - with some members expressing a need for additional economic stimulus. In turn, we have two essential ingredients which make up the recipe for a weak US dollar - The premise of further stimulus and the Fed's commitment to maintain exceptionally low interest rates for an extended period (mid 2013). We can expect the conjecture to continue ahead of the Fed's two-day special policy meeting on Sept 20. Conjecture aside, the focus this week will be squarely on the US jobs situation with non-farm payrolls coming up on Friday. This evening we have the ADP employment gauge with Challenger job cuts also on the bill - both considered a pre-cursor to Friday's NFP's. Also due for release is US factory orders and Chicago PMI.
Notably, the Aussie making solid ground against the Euro with EURAUD moving through the downside of its 200 Day Moving Average at 1.3520. In short, we consider the Euro vulnerable to the downside at these levels as traders pare rate hike bets with an endless stream of negativity spilling from both the periphery and tier 2 economies, namely Italy and Spain. One Euro is currently equal to A$1.3500. Data from the Euro-zone this evening includes German/Euro-zone unemployment data and Euro-zone CPI estimate for August.