AUD moves higher, NFP next

The Australian dollar has found its legs on Thursday, in what has been an uneventful week. Currently, AUD/USD is trading at 0.7308, up  0.50% on the day.

The Australian dollar has had a mostly quiet week, and even an RBA policy decision on Tuesday failed to elicit much of a response from the currency. The RBA meeting was a yawner, with the Bank maintaining interest rates at a record low of 0.10% and its QE programme of AUD 4 billion/week. The rate statement was similar to the September statement, so it’s really not a surprise that Aussie didn’t react.

In his rate statement, RBA Governor Lowe repeated that he does not expect a rate hike before 2024. Of course, Lowe may be forced to press the rate trigger earlier if economic conditions change, such as inflation continuing to climb and threatening to overheat the economy. The central banks of New Zealand, Norway and others have already raised rates, and the Fed could well follow in 2022. As more central banks jump on the bandwagon and tighten policy, the RBA may have to revise its timetable for a rate hike to an earlier date.

All eyes are on US nonfarm payrolls for September, which will be released on Friday. This release has additional significance because the Fed would love to see some strong numbers before announcing a taper of its bond purchase programme.

Nonfarm payrolls created 235 thousand jobs in August, a weak reading. The consensus for September is around 500 thousand. If the economy can meet or beat this figure, that should cement a Fed taper in November or December and send the US dollar higher. If NFP misses the consensus, there will be more uncertainty over the timing of a taper, as well as concern over the strength of the US recovery, which could weigh on the US dollar. I would not be surprised to see volatility from AUD/USD in Friday’s North American session.

AUD/USD Technical

• AUD/USD is putting pressure on resistance at 0.7325. Next, there is resistance at 0.7389, protecting the round number of 0.7400
• The pair has support at 0.7184.  Below, there is support at 0.7107

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