Aussie dollar higher as US dollar weakens

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The Australian dollar is trading higher this morning after the poor result of jobs data from the US last Friday.

“The US dollar was undermined by the weak jobs data,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.

“That US dollar weakness has thrown a lifeline to the Australian dollar which was slipping under the weight of its various deficiencies,” he added.

According to McKenna, the lower than expected non-farm payrolls data may be enough reason for the US Federal Reserve to pause at next week’s interest rate setting meeting.

“That print (non-farm payrolls data) was below the bottom end of expectations and came with an associated reduction of 66,000 jobs for the previous two months,”

“That pause would be reasonable and could give the US Fed an opportunity to assess whether the recent run of weak data is indeed transitory or whether it is something more serious,” McKenna said.

In the meantime, he said other indicators for the strength of the Aussie dollar remain under pressure.

“It suggests investors’ eyes are looking elsewhere than on the Aussie dollar at the moment,” he said.

“But that doesn’t mean a weaker US dollar can’t lift the Aussie higher should the current weakness persist.”

Looking at the technicals a move up through 0.7450/60 opens the way for a run toward recent highs at 0.7515/20.

Fundamentally this week’s data flow in Australia is going to be key for the direction of the Aussie dollar.

Today we get quite a bit of important data as we await the RBA tomorrow afternoon and Q1 GDP Wednesday. There will also be data on the performance of services industry, the monthly inflation gauge, ANZ job ads, and Q1 company gross operating profits.

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According to McKenna, what’s really interesting about the data – intriguing really in the context of the emerging debate around recession in Australia – is that the Citibank Economic surprise index is at 55.3.

“That’s the highest level since February 2016. It makes RBA Governor Lowe’s statement tomorrow afternoon a really interesting and important one in the context of data and the emerging debate,” he added.

The markets will also be keeping an eye on the Q1 GDP numbers this Wednesday.

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