The Chinese yuan and NZ dollar are quiet on Thursday, but the Aussie continues to lose ground after the unemployment rate rose higher. As expected, the Fed lower interest rates but sought to reassure the markets that the U.S. economy is in good shape
AUD/USD has recorded considerable losses on Thursday, as the Aussie’s slide continues. In the Asian session, the pair is trading at 0.6788, down 0.53%.
The Australian economy created 34.7 thousand jobs in August, marking a second straight month of strong job growth. Despite the rosy numbers, the unemployment rate rose to 5.3%, up from 5.2% a month earlier. This was the highest jobless rate since last September. An increase in unemployment is another sign that the RBA could lower interest rates in October.
There were no surprises as the Federal Reserve cut the benchmark rate by a 1/4% on Wednesday. Fed Chair Jerome Powell said that domestic economic conditions were “favorable”. The rate statement did not provide any hints with regard to further rate cuts this year. According to the CME Group, there is a 43% of another rate cut in October.
On Wednesday, AUD/USD broke below the 50-day moving average support at 0.6849. The pair has tested support at 0.6805 with a strong downward pressure in the Asian session. Below, there is immediate support at 0.6760. On the upside, 0.6839 has strengthened in resistance as the Aussie continues to lose ground.
USD/CNY remains rangebound on Thursday. In the Asian session, the pair is trading at 7.101, up 0.24%.
There was plenty of hype around the Federal Reserve decision, but in the end, the Fed lowered rates by 25 basis points, as expected. What was perhaps more surprising was a positive message from Fed Chair Jerome Powell, who said that the U.S. economic outlook remained “favorable”. The rate statement did not provide any clues about future rate cuts, but there could be more to come before the end of 2019.
With no major Chinese events for the remainder of the week, U.S. indicators will have a magnified effect on the movement of the Chinese yuan. Traders should keep an eye on the Philly Fed Manufacturing Index and unemployment claims, both of which will be released during the North American session.
The Chinese yuan seems content to drift, as it has been unable to mount an attack in either direction. On the upside, USD/CNY 7.1100 is within striking distance, but this line hasn’t been tested since last week. If the pair can break through this resistance line, I would expect a breakout towards 7.1700, which is the next resistance line. On the downside, there is support at 7.0592.
NZD/USD is showing little movement on Thursday. In the Asian session, the pair is trading at 0.6311, down 0.10% on the day.
The New Zealand economy grew by 0.5% in Q2, a slight drop from the previous two readings of 0.6%, Still, investors didn’t react, as this reading was above the forecast of 0.4%. However, annualized growth for Q2 dropped to 2.1%, its lowest level since 2013. Weak global conditions and the ongoing U.S-China trade war have taken a toll on the New Zealand economy, and I expect the kiwi to remain under pressure, as investor risk appetite is not particularly high.
The Federal Reserve lowered rates on Wednesday, marking back-to-back rate cuts. The move was widely expected, and investors have shown little reaction. Even with the cut, the Fed sounded positive about the U.S. economy, with Fed Chair Powell saying that the economic outlook remained “favorable”.
NZD/USD broke through support at 0.6325 on Wednesday. The pair now has its sights on support at 0.6280, which has held since September 3. If the pair can break below this line, there is room for a downward breakout by the pair. On the upside, the next resistance line is 0.6360. Above, 0.6425 is a major resistance line.
Kenny is an experienced market analyst, with a focus on fundamental analysis. Kenny has over 15 years of experience across a broad range of markets and assets –forex, indices and commodities.