It’s about to get busy in the forex arena again, as the RBA decision and FOMC minutes are lined up.
Oh, and did I mention the NFP is due, too?
But before we jump into all that, check out my quick recap of the market themes that pushed currency pairs around last week!
And now for the potential market movers this week:
Major Economic Events:
RBA rate statement (July 5, 4:30 am GMT) – It’ll be the Land Down Under’s turn to get an interest rate hike this week!
The RBA is widely expected to increase borrowing costs by 0.50% this time, effectively bringing their cash rate up from 0.85% to 1.35% in an effort to limit inflation.
Since this scenario has been pretty much priced in for a while now, Aussie traders will likely pay more attention to what the central bank might have up its sleeve for the next few months.
Keep in mind that consumer confidence is dropping while the housing market remains a concern, so any hints of slowing down their rate hikes might still bring downside for the currency.
FOMC meeting minutes (July 6, 6:00 pm GMT) – The U.S. central bank will be releasing the transcript of their latest policy meeting, shedding more light on the factors that influenced last month’s decision.
Recall that the FOMC statement in June featured a whopping 0.75% increase in interest rates versus the projected 0.50% hike.
If the meeting minutes reveal that more policymakers are still leaning towards even more aggressive moves in the coming months, the dollar might enjoy another wave higher against its peers. On the other hand, hints that the Fed is likely to take it easy from here might spur some profit-taking.
Canadian jobs report (July 8, 12:30 pm GMT) – Canada is expected to print a slight slowdown in hiring for June, with the employment change projected to come in at 20K versus the earlier 39.8K increase.
Still, this should be enough to keep the unemployment rate steady at 5.1%. A pickup in wage growth and labor force participation might also be enough to reassure Loonie bulls that the BOC might carry on with its tightening cycle.
U.S. non-farm payrolls report (July 8, 12:30 pm GMT) – Uncle Sam will be ending the week with another set of fireworks, as the June NFP report will be released on Friday.
Analysts are expecting to see a 275K increase in hiring for the month, slower than the earlier 390K gain but still likely enough to keep the jobless rate steady at 3.6%. Average hourly earnings could post another 0.3% uptick.
Leading jobs indicators are due throughout the week and would probably impact NFP expectations and dollar price action as well.
Forex Setup of the Week: AUD/USD
This pair recently fell through the floor around the .6875 area, marking the start of another wave lower. Price seems to be in the middle of a correction and might be due to retest the former support.
This happens to be in line with the 61.8% Fibonacci retracement level and the 100 SMA dynamic resistance, which might keep gains in check. If so, AUD/USD could resume the slide back to the swing low at .6766 or lower.
Stochastic seems to be favoring more declines, as the oscillator has reached the overbought zone. This means that buyers are starting to feel exhausted and might let sellers take over.
Also, the 100 SMA is still below the 200 SMA to confirm that resistance levels are more likely to hold than to break.
In any case, the RBA decision would likely bring some volatility for this pair early in the week while the NFP release might bring make-or-break moves for the dollar later on.
