Global macro overview for 31/07/2017:
This week looks very busy on the financial markets, so let's take a look at the most important economic events for the coming days: NFP Payrolls, PMI/ISM, US PCE Core, Eurozine CPI, Bank of England, RBA and job market from Canada and New Zealand.
Many of the next week's US publications have a chance of influencing the FED and its decision before the September meeting. After the highest reading since August 2014 for ISM for the industry in June, the market is now expecting a correction, but the result should still point to continued recovery. PCE Core in Tuesday, the FED's favorite measure of inflation, may bury its last hope of a hike by the end of this year if it points to a further decline of 1.4%. In the report on the US labor market, the global investors will be most interested in average wages increase. Leading indicators suggest reading above expectations (about 0.3% m/m), which could bring some relief to the US Dollar.
The main events for the Euroland are the July CPI data and the first GDP reading for Q2 (released on Tuesday), but they are unlikely to be able to clearly disrupt the recent trend of the EUR/USD. As long as the ECB does not show signs of concern about the effects of a strong currency for the economy (weakening of exports, deflation imports), the market participants will still be buying the dips. Unexpected verbal interventions are now the biggest enemy of the EUR/USD rally.
In the UK, the market has already abandoned expectations of a rapid interest rate hike, but the Bank of England decision on Thursday may still be interesting. The global investors will pay attention to the distribution of the MPC votes, that recently it was 3-5 for a raise. The Inflation Report can offer insight into the outlook for inflation, which gained momentum after the recent drop in CPI. The British Pound has recently descended from the foreground and next week's events might not necessarily change that.
The Japanese calendar does not contain important publications, so USD/JPY will only be subject to general sentiment and a change in the US Treasury Bond market.
The Reserve bank of Austrailia will make the interest rate decision on Tuesday. No change is expected and the positive outlook for the economic outlook should be reiterated in the Rate Statement. At the same time, the RBA will seek to cut off the rising expectations of a rate hike following a growing general trend among other central banks. Still, it will not be a big surprise, as recent comments from Lowe's president and vice-president Dabelle pointed to the "difference" of the RBA.
Let's now take a look at the AUD/USD technical picture at the H4 timeframe. After the recent high at the level of 0.8065, the price is now slowly moving lower towards the level of 0.7874, the most important technical support for the bulls. Any breakout below this level might deepen the correction to the level of 0.7838 and even 0.7777.
