AUD/USD, ASX 200 Analysis: Asian Open – 10th July 2023

Market summary

Whilst Friday’s nonfarm payroll showed ‘only’ 209k jobs added compared to 225k expected and 306k prior, it’s still a healthy number that won’t deter the Fed from hiking further. Especially with unemployment at 3.6%
Wall Street initially rallied but was unable to hold onto gains, closing slightly lower on Friday
But the slower jobs number weighed on the US dollar which was the weakest forex major on Friday and second of last week (that title goes to the Canadian dollar)
Fed fund futures now imply a 93% chance of a Fed hike this month, and for that to be the final hike of the cycle
A strong employment report for Canada saw USD/CAD form a bearish engulfing day and bearish hammer on the weekly chart
The Japanese yen continued to broadly strengthen on Friday, sending USD/JPY to a 2-week low just shy of 421, during its worst day in two months (and closing with a bearish engulfing week)
EUR/USD closed at an 8-day high and now trades less than a days’ average range away from the 1.1012 high
GBP/USD reached our 1.2800 target outlined last week, and shows the potential to break above the June high and make a run for the 1.30 handle
USD/CHF accelerated lower after rolling over from 0.90 resistance on Thursday, and shows the potential to probe the YTD low of 0.8820
WTI crude oil is also rallying which could make the increasingly short speculators question their positioning, with oil now showing the potential to retrace and potentially break above $75

Events in focus (AEDT):

View The Week Ahead for a look at this week’s economic data and themes
09:50 – Japan’s current account, bank lending
11:30 – Australian building approvals (revised), business turnover
11:30 – China CPI, PPI
Fed members speak (Daly 00:00, Mester 01:00, Bostic 02:00)

ASX 200 at a glance:

92% of the ASX 200 stocks declined on Friday during its worst day for four months
A bearish engulfing / outside week formed
Although the market held above 7,000 – a key line of defence for bulls to defend
SPI 200 futures were 0.36% higher by Friday’s close
The ASX is expected to open above the June 26^th low today
Potential for some mean reversion (7100 and 7145 are nearby resistance levels)

AUD/USD 1-hour chart:

AUD/USD formed a small bullish hammer for a second consecutive week, and last week’s candle was a bullish inside week. The weekly candles also show a double bottom around 0.66, and Friday’s bullish engulfing candle forms a higher low on the intraday charts and has taken prices to the top of its 0.66 – 0.67 range. Basically, demand is building which suggests a bullish breakout is on the cards. However, Friday’s rally looks stretched over the near-term, and we’d prefer to see prices retrace further and seek evidence of a swing low (such as the support zone around 0.6660) ahead of an anticipated break higher. A softer US inflation report (Tuesday US, Wednesday AM Australia) could certainly help with the bullish case.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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