Overnight the Aussie has spiked following a big drop in unemployment with the rate falling from 6.2% to 5.9% leading to AUDUSD jumping to 0.7150. The 0.7000 remains a key support level for the Aussie below which it stubbornly refuses to dip below despite commodity prices remaining depressed and China’s economy continuing to slow at a pace.
We’ve regularly discussed how the relationship between the Aussie and China has diminished so even though there are many calling for further weakness to the mid 0.6000 area, because of the breakdown of that relationship and the RBA’s slightly less dovish stance, the downside move has been hard to come by.
Today all eyes are on central bankers once again with firstly Mario Draghi who speaks to the EU Parliament at 8.30 GMT. Then later in the day we are bombarded by Fed speeches with Lacker & Bullard, then Yellen at 2.30 GMT, concluding with Evans afterwards. What will be key here is not so much whether there’s further evidence that lift off will happen next month, but any guidance as to how the cycle will unfold with the market expecting a gradual path of rate hikes. EURUSD will be the one to watch today as we are likely to see further divergence between the ECB and Fed, so the 1.0600 level is a major support level to keep an eye on.
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