At these levels aussie looks attractive on the offer with a 0.74xx target - however USD supply has been strife since last week when rate expectations sold off amid poor GDP print to just p12% in september - down from 25% earlier in the week.. this week failed to improve, with little impetus for this to be the case, though the greenback now looks to NFP today for guidance. A beat/ firm print should help aussie offer well at these levels given we are right at the 0.766 level, so any USD strength arising from the NFP print has a bias to see AUD$ move lower, though as the macro landscape questionably is changing, it is uncertain if it will be enough to surpress yield seekers demand for aussie deposits for long/ a sustained period (if at all), which is expecially odd since we saw the rate brought down this week whihc should have set a tone for the week, as we have seen with the BOE and GBP. After NFP we will have a clearer view.
From here i think aussie positioning should be sidelined until the NFP print is clear - a miss and i actually think Aussie is better to trade bid, with 0.78 a firm target. A NFP hit and that should offer aussie lower, though for some reason I see the risk asymmetrically skewed to aussie topside, given the very week reaction to what is/ should be the biggest fundamental driver possible - a rate cut. So much of this trade is being vigilant - an NFP miss, buy a 0.766 confirmed breakout, a NFP hit - ensure AUD$ is trading with a clear bid bias.. any 10-30pips movement lower will not suffice at these levels, aussie is still likely bidding.
RBA Minutes Highlights:
- Underlying To Remain Under 2% For Much Of Forecast Period, Reach 2 % By End 2018
- Prospects For Economy Positive, But Low Allows For "Even Stronger Growth"
- Judged Risks Associated With Rising House Prices And Debt Had Diminished
- A$ Remains Significant Source Of Uncertainty For , Growth Forecasts
- Economic Growth And Forecasts Little Changed Overall
- Forecasts Underlying 1.5% By End 2016, 1.5-2.5% End 2017, 1.5-2.5% End 2018
- Forecasts GDP Growth 2.5-3.5% End 2016, 2.5-3.5% End 2017, 3-4% End 2018
- Says Unemployment To Fall Only A Little Out To 2018, Employment Growth To Be Modest This Year
- Drag On GDP From Falling Mining Investment Looks To Have Peaked, Non-Mining Still Subdued
- Dwelling Investment To Stay Strong For Next Year Or So, But Raises Risk Of Oversupply
- GDP Growth Looks To Have Moderated In Q2 As Net Exports Added Less
- Wage Growth Expected To Remain Low, Rise Modestly Out To 2018
- Increasing Supply, China Steel Cutbacks To Put Downward Pressure On Iron Ore Prices
- Growth In China Expected To Slow Gradually Over Next Few Years, Housing A Risk
- Brexit To Have Limited Effect On Australia's Major Trading Partners