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AUDUSD Extends Slump to Two-Month Lows as Equities Head South

FOREX
  • Pressure on major equity indices and the slightly firmer greenback has contributed to another 1% decline for the both the Australian dollar and New Zealand dollar on Wednesday. AUDUSD now trades at two-month lows with this week’s move reinforcing current bearish technical conditions. The break of support at 0.6596 as well as 0.6562, a Fibonacci retracement point, are significant technical developments.
  • With the historical safe haven theme in play across FX markets, the Japanese Yen joins the US dollar as relative outperformers on the session, both marginally in the green. The greenback was underpinned by an upside surprise in the ADP employment change for July (324k vs 190k est.), potentially bolstering expectations ahead of the non-farm payrolls release on Friday. The USD index briefly rose to fresh recovery highs of 102.78 before moderating around 20 pips ahead of the APAC crossover.
  • The likes of EUR, GBP and CAD are all showing moderate declines in the region of 0.35-0.45% as the market awaits more meaningful US data across Thursday and Friday.
  • The dampened risk sentiment, most notable by equities heading south has further weighed on the emerging market FX basket. Weakness across Latin American currencies and the South African rand highlight this point. Of note, Brazil’s central bank is expected to initiate an easing cycle this evening.
  • Overnight on Thursday, markets may focus on the China Caixin Services PMI before Swiss inflation data as Europe sits down. Bank of England rate decision then takes centre-stage before US unit labour costs and ISM Services PMI data.
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