RBA, to hike or not to hike?

During Friday’s American session, the US Employment report for May sent mixed signals to traders, as the Non-Farm Payrolls figure rose instead of dropping yet the Unemployment rate also rose from 3.4% to 3.7%. It is important to note that the US Manufacturing sector lost a number of jobs, thus potentially hinting towards a reduction in US Manufacturing activity. For the time being the report does not seem to provide any elements that may alter the Fed’s intentions. Furthermore, we note that we are currently in the Fed’s blackout period and as such will not see any Fed speakers until the FOMC’s interest rate decision in two weeks.

USD/JPY rose on Friday breaking the 139.90 (S1) resistance line, now turned to support. Nevertheless, the big picture of a sideways motion seems to be maintained for now hence we keep our sideways motion bias. There may be some slight bullish tendencies as the RSI indicator remains above the reading of 50. Should the bulls take over, we may see the pair aiming if not breaking the 142.20 (R1) resistance line. Should the bears be in charge of the pair’s direction, we may see the pair breaking the 139.90 (S1) support line and aim if not reach the 137.55 (S2) support level. 

On the monetary front, we note that RBA is to release its interest rate decision. The bank may opt to remain on hold, keeping the cash rate at 3.85% as RBA Governor Lowe stated that monetary policy is restrictive and working, yet the acceleration of inflation for April may force the data-dependent bank to proceed with another rate hike which may provide some support for the Aussie.

AUD/USD corrected lower yesterday, after taking an unsuccessful swing at the 0.6640 (R1) resistance line. Despite the correction lower the upward trendline guiding the pair since the 31^st of May seems to remain intact, yet should the pair stabilise we may see its price action breaking the prementioned upward trendline and forcing us to switch our bullish outlook in favour of a sideways motion bias initially. Should the selling interest be extended we may see AUD/USD breaking the 0.6575 (S1) support line and aim for the 0.6525 (S2) support level. On the other hand for a bullish outlook, we would require the pair to form a higher peak than the last one and thus break the 0.6640 (R1) resistance line, taking aim at the 0.6700 (R2) resistance level. On the commodities front, we note Saudi Arabia’s pledge to proceed with deeper oil production cuts yet for the time being oil traders do not seem to be particularly impressed. The production cuts are to be implemented in July and production is expected to drop to 9 million bpd from May’s 10 million bpd. 

Other highlights for the day:

In today’s European session, we note the release of Germany’s exports for April on a mom basis, followed by Switzerland’s and Turkey’s CPI rates for May and the Eurozone’s forward-looking Sentix index for June. During the American session, we note the US Factory Orders rate on a mom level for April followed by the ISM Non-Manufacturing PMI figure for May. Lastly, during tomorrow’s Asian session, we note Japan’s Household spending rate on a YoY basis, followed by Australia’s Current Account figure for Q1 and RBA’s interest rate decision for June.

As for the rest of the week:

On Tuesday, we note the release of Germany’s industrial orders for April. On Wednesday, we get Australia’s GDP rate for Q1, China’s trade data for May, Germany’s industrial output for April, UK’s Halifax House prices for May and Canada’s trade data for April, while on the monetary front we note the release of BoC’s interest ate decision. On Thursday we get Japan’s GDP rate for Q1, Australia’s trade data for April, Eurozone’s GDP rate for Q1 and the US weekly initial jobless claims figure. Finally, on Friday we note the release of China’s inflation metrics for May, Sweden’s GDP rate for April, Norway’s CPI rates for May and Canada’s employment data for the same month.

AUD/USD H4 Chart

Support: 0.6575 (S1), 0.6525 (S2), 0.6445 (S3)

Resistance: 0.6640 (R1), 0.6700 (R2), 0.6770 (R3)

USD/JPY H4 Chart

Support: 139.90 (S1), 137.55 (S2), 135.15 (S3)

Resistance: 142.20 (R1), 145.10 (R2), 147.35 (R3)

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