AUD/USD holds 64c ahead of AU jobs, crude oil slips 3%: Asian Open

• US treasury yields were lower a day after Powell effectively dashed hopes of a Fed rate cut this year
• Fed’s Mester also commented on the “strong labour market” and desire to be “pretty confident inflation is on its downward trajectory” before easing on Wednesday
• Whist these comments could have been seen as bullish for yields, investors seem to be stepping back into the bond market as the Fed are now seen to be taking the fight against inflation a tad more seriously (bond prices move inversely to yields, and inflation is generally bad for bonds)
• Fed fund futures now imply a 54.8% chance of rates remaining steady until July, and any bets of a cut are steadily lower from September’s 46.6% probability
• Lower yields saw the US dollar snap its 6-day winning streak, EUR/USD rose in line with yesterday’s bias and helped USD/JPY retrace slightly towards 154
• All eyes remain on the 155 for USD/JPY – as 155 is the level Japan’s ex-FX diplomat warned could be the threshold for the BOJ to intervene a couple of weeks ago
• Separately, Japan’s Finance Minister Suzuki flashed a fresh warning to yen speculators by saying “we will respond appropriately to excessive FX moves” on Wednesday
• Soft earnings and hawkish comments weighed on Wall Street, sending the Nasdaq 100 and S&P 500 to a 2-month low
• The DAX managed an early bounce in line with yesterday’s bias to meet the 4-hour bullish target, although weak sentiment to global stock markets ultimately weighed and sent it lower by the close
• A rise in US commercial inventories saw crude oil prices tumble overnight and outweigh any concerns over Middle East supply risks. WTI crude oil fell over -3% by the close, invalidating my bullish bias with a break beneath $84 and settling just below $83 on trend support.

Economic events (times in AEST)

• 09:50 – Japan’s foreigner stock/bond purchases
• 11:30 – Australian employment report
• 11:30 – BOJ board member Noguchi speaks
• 14:30 – Japan’s tertiary activity index
• 17:15 – ECB's De Guindos Speaks
• 20:00 – China foreign direct investment
• 22:30 – US jobless claims, Philly Fed manufacturing
• 23:05 – Fed Bowman speaks
• 23:15 – FOMC member Williams speaks
• 01:00 – FOMC Member Bostic Speaks

AUD/USD technical analysis:

There is not a lot of to update from yesterday’s analysis. But for those that missed it, a head and shoulders pattern projects a downside target just beneath 63. Yet AUD/USD’s ability to hold above 63c last year despite a slew of negative sentiment, I remain doubtful that it will simply break beneath this level if revisit – unless the wheels fall off of the global or Australian economy.

AUD/USD bounced from 64c in line with Wednesday’s bias, and if AU employment data beats expectations or even comes in around them (which are decent anyway) then I see the potential for AUD/USD to extend its rally and head for the 0.6475 – 0.6500 resistance zone. At which point I will reassess its potential to continue higher or form a swing high.

Crude oil technical analysis:

It was the second worst day of the year for crude oil, which despite showing signs it wanted to hold above $84 earlier in the European session, was quick to break key support levels when inventory data arrived. Crude oil saw a daily close beneath trend support, which might provide a dynamic area for bears to fade into should we see prices retrace higher in today’s Asian session.

$80 is the next major support level which is near the 50-day average, but also take notice of the monthly pivot point at 81.11 that could spur profit taking should prices continue lower.

However, something for bears to keep in mind is that daily trading volumes are lower and RSI (2) is oversold. Therefore, whilst the near-term bias is bearish to the $80 - $81 area, I am also on the lookout for evidence of a swing low.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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