Daily Report: Aussie Boosted by Employment, BoE & Bernanke Awaited

Market Overview | Written by AC-Markets | Jul 10 08 06:44 GMT |

Aussie is so far the biggest winner today, boosted by much better than expected employment report. Unemployment rate dropped from 4.3% to 4.2% in Jun. Also, the job market rebounded and showed 29.8k expansion, above consensus of 10k and cancelled out May's unexpected contraction of -25.6k. The job data, which expanded for 19 out of the past 20 months, and last week's strong gain in retail sales, are both showing the underlying robustness in the Aussie economy, particularly so in a climate of significant global uncertainty.

Japanese Domestic CGPI accelerated more than expected from 4.7% yoy to 5.6% yoy in Jun, hitting a 27 year high, driven by surging commodity prices. Trade surplus shrank from 634.7b to 529.4b.

Main focus in the European session today will be BoE rate decision, which is widely expected to keep rates unchanged at 5.00%. Inflation accelerated to 3.3% in May and according to BoE Governor King, inflation could further skyrocket to above 4% this year. That prompted some speculations that the next move from BoE is a hike. Nevertheless, markets generally believe the risk of recession in UK ties up BoE's hands for any rate hike. Indeed. some are speculating that BoE could indeed cut rates once the acceleration in oil and food prices slow down.

Dollar continues to trade with a soft tone today but after all it's still bounded in range against Euro swissy and yen. Traders are awaiting Fed Chairman Bernanke's Testimony to house committee today for hints on Fed's next move. After a series of soft data, traders continue to pare bet on rate hike from Fed with interest rates futures now showing over 30% odds that Fed will be on hold at 2.00% till the end of the year, up from below 10%.
AUD/USD Daily Outlook

Daily Pivots: (S1) 0.9499; (P) 0.9544; (R1) 0.9614; More

AUD/USD's strong rebound from 0.9475 extends further to as high as 0.9617 today. Break of 0.9568 minor resistance indicates that price actions from from 0.9667 has completed with three ways down to 0.9475 already. The corrective nature indicates that it's merely a correction to rise from 0.9372. At this point, intraday bias remains on the upside as long as 0.9544 minor support holds. Further break of 0.9639 resistance will indicate that rise from 0.9327 has likely resumed for next upside target of parity. However, on the downside, below 0.9544 will argue that consolidation in AUD/USD is still in progress and will turn intraday outlook neutral again.

In the bigger picture, with 0.9291 support intact, followed by break of 0.9653 key medium term resistance, the whole up trend from 0.8512 could have resumed. Regardless of the structure, such rally is treated as part of the long term up trend from 0.4773 (01 low) and is still expected to extend further to next medium term target of 100% projection of 0.4773 to 0.8008 from 0.6773 at 1.0008 which overlaps with parity.

However, the upside momentum since making a low at 0.7675 is still far from being convincing. A break below 0.9327 support will be the first alert that rise from 0.9512, as well as that from 0.7675 has completed. This will set the stage for deeper decline back into 0.7675, 0.8870 support zone, with key long term support of 0.8008 lying in between.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:50	JPY	Japan Domestic CGPI M/M Jun	0.80%	0.60%	1.10%	1.20%
23:50	JPY	Japan Domestic CGPI Y/Y Jun	5.60%	5.30%	4.70%	4.80%
23:50	JPY	Japan Trade balance (jpy) May	529.4B	500B	634.7B
23:50	JPY	Japan Current account May	2000B	1919.2B	1380.9B
1:30	AUD	Australia Unemployment rate Jun	4.20%	4.30%	4.30%
1:30	AUD	Australia Employment change Jun	29.8K	10K	-19.7K
8:00	EUR	ECB Monthly Report (July)
11:00	GBP	BOE rate decision Jul		5.00%	5.00%
12:30	USD	U.S. Jobless claims		395K	404K
14:00	USD	Bernanke and Paulson Testify