AUDUSD Fundamentals for August 03 - August 10

AUDUSD Fundamentals for August 03 - August 10

4 August 2014, 17:01
Mike Dennis
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Fundamental Forecast for Australian Dollar: Neutral
  • Australian Dollar May Rebound as Markets Retool Fed Policy Outlook
  • Jobs Report May Overshadow RBA Rate Decision as Aussie Catalyst


The Australian Dollar faced heavy selling pressure last week, with prices dropping through the bottom of a range that contained price action since the beginning of June. The force behind the move lower came from external factors: an impressively strong second-quarter US GDP figure and an easing of the FOMC’s concern about persistently low inflation hinted Janet Yellen and company may move swiftly to raise rates after the QE3 asset purchase program is wound down in October.

The recovery may prove short-lived however as domestic factors return to the spotlight. The RBA monetary policy announcement seemingly ought to take top billing, but officials are unlikely to offer up anything unheard of in recent months. Another restatement of the commitment to hold rates unchanged for the foreseeable future may force a pause in the Aussie’s recovery, but the likelihood of another strong push lower will probably hinge on July’s employment figures. A net jobs gain of 13,200 is expected, marking a slowdown from the previous month’s 15,900 increase. Furthermore, Australian economic data has increasingly underperformed relative to consensus forecasts since mid-April, opening the door for a downside surprise. Such a result is likely to extend the perceived length of the standstill on the monetary policy front, undermining yield-based support for the Aussie and forcing prices lower in earnest.

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