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Australian Dollar has 80c in sight

By Shameem Musa

The Australian dollar rallied into the close on Friday buoyed by ongoing strength in commodity prices and underwhelming U.S labour market data. U.S non-farm payroll numbers printed well below expectations and saw the AUD test intraday highs nearing 0.80 U.S cents before investors reviewed the softer print in context. Historically August has been a poor month for strong employment growth and after a sustained period of labour market strength analysts doubted the read will do much to derail the Federal Reserve’s path to normalisation. Moving lower into the close the Aussie finished the week buying 0.7975 and opens this morning at 0.7961. Attentions now turn to Tuesday’s RBA rate announcements and Thursdays retail sales print for direction through the week ahead.

The New Zealand dollar failed to follow its commodity counterparts higher through trade on Friday struggling to take advantage of softness in U.S labour market data. Having slipped below technical supports at 0.7190 the Kiwi touched intraday lows at 0.7126 and looks set to test support at 0.71. With support now resistance at 0.7190 attentions turn to offshore data sets this week as the domestic macroeconomic docket remains relatively light on and the kiwi will be at the mercy of off shore directional drivers.

The Great British Pound advanced on Friday against the Green back on poor US employment data reaching 1.2995. With little to no UK macroeconomic data at the back end of last week the GBP/USD pair traded within a limited range. Looking ahead this week and on Monday it all starts with the release of Construction PMI for August, and Services PMI on Tuesday. Construction is forecast to come out at 52.0 in August from 51.9 in July, and Services at 53.5 from 53.8 in July. On Thursday the release of Halifax House prices for the month of August, and finally on Friday sees the release of Industrial and Manufacturing Production and the Trade Balance both for July. Trade Balance data is expected to show a narrowing of the deficit to -11.9bn from -12.72bn previously.

Despite a weaker-than-expected US nonfarm payrolls report the Euro struggled to mount any significant directional momentum through trade on Friday against the Greenback moving between a low of 1.1843 and a high of 1.1919. Data released showed that the U.S economy created 156,000 jobs in the month of August missing expectations of 180,000, the unemployment rate ticked up to 4.4% from 4.3%. A key piece of data the Federal Reserve monitors for evidence of continuing strength in the labour market is wages growth which for the year to August held at 2.5%. meanwhile in Japan, capital spending rose by 1.5% in Q2, well under consensus expectations for a rise of 7.9%, the small rise was despite a weaker yen and firmer overseas demand. The USD/JPY pair is currency changing hands at 109.80