It’s NFP Friday, fellas!
Check out this AUD/USD setup I’m watching after China’s RRR cut and ahead of the U.S. jobs report.
Before moving on, ICYMI, yesterday’s watchlist looked at EUR/USD’s trend line breakout and pullback ahead of the U.S. core PCE price index. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. core PCE price index rose by 0.2% m/m in August as expected, personal income up by 0.2% m/m vs. 0.3% forecast and personal spending up by 0.8% m/m vs. 0.7% consensus
Chicago PMI improved from 42.8 to 48.7 in August vs. 44.3 estimate, reflecting slower pace of industry contraction
Chinese Caixin manufacturing PMI rose from 49.2 to 51.0 in August instead of dipping to 49.0, reflecting a return to expansion
PBOC announced a cut to its FX RRR by 200 bps from 6% to 4% from September 15, reducing the amount of foreign currency reserves required for banks to keep in vaults
China’s National Administration of Financial Regulation and PBOC to reduce homebuyers’ minimum downpayment time and allow lower bank rates for existing mortgages
Price Action News
Volatility picked up for the Aussie and Kiwi early in today’s Asian session, when the PBOC decided to cut its forex RRR by 200 basis points in order to reduce the amount of foreign currency reserves required for banks.
This move is aimed at freeing up dollar liquidity, consequently propping up the yuan. Apart from that, officials also announced that they would reduce the time required for mortgage holders to complete minimum down payments while also allowing lower rates for banks.
All in all, these stimulus efforts are expected to boost the country’s shaky property sector, possibly lifting demand for commodities in the process. However, AUD and NZD quickly unwound the initial gains and more, as traders are likely bracing for the highly-anticipated U.S. NFP report.
Upcoming Potential Catalysts on the Forex Economic Calendar:
ECB’s meeting minutes at 11:30 am GMT
U.S. core PCE price index at 12:30 pm GMT
U.S. initial jobless claims at 12:30 pm GMT
U.S. personal income and spending at 12:30 pm GMT
U.S. Chicago PMI at 1:45 pm GMT
Japan’s capital spending at 11:50 pm GMT
China Caixin manufacturing PMI at 1:45 am GMT (Sept 1)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
AUD/USD: 15-min
This forex pair has been trending lower on its short-term time frame, forming lower highs and lower lows inside a descending channel.
Another test of resistance seems to be in the works, as AUD/USD is pulling up close to the pivot point (.6480) and a former support zone.
If this holds as a ceiling, watch out for a continuation of the selloff to the channel bottom near the .6450 minor psychological mark.
Sustained selling pressure might even take it down to S2 (.6440) or lower, depending on the outcome of the NFP report. On the other hand, a rally past the channel top could pave the way for a test of R1 (.6510) or even R2 (.6530).
All eyes and ears are on the U.S. jobs report due later today, so make sure you practice proper risk management and stay on your toes for potentially large swings!
