U.S. November Payrolls set to dominate tapering timing
The Dollar move in the near term doesn’t really matter since the payrolls data release this Friday could change the theme. If we see payrolls increase above 200K again in November, the Federal Reserve (Fed) could taper as soon as December. This is an expectation at the moment.
Data this week will probably hint at a divergent move among global central banks. A sound U.S. Non-Farm Payroll (NFP) figure could change the monetary policy as soon as this month, and the European Central Bank (ECB) and Reserve Bank of Australia (RBA) should continue highlighting that the current easing cycle isn’t over yet.
October payrolls raised chances that the Fed would begin tapering its monthly bond purchases as soon as this month, despite that the Fed never changed any monetary policy in the past. Based on this, I think the Fed may wait a bit longer to taper, plus the 4Q Gross Domestic Product (GDP) growth should be slightly slower. In addition, another fiscal drag could kick in early next year.
The ECB’s meeting could be the second most important event this week. However, it will probably keep its benchmark rate unchanged at a record-low 0.25%, refusing to conduct a quarter-point back-to-back cut after it did in November, citing low inflation. Recovery in the Euro Zone gains momentum, with confidence and economic indicators climbing higher. According to the ECB’s prediction so far, there is no deflation to be seen. Hence, the Euro may slightly climb higher this week since there is little expectation for another rate cut.
Good news surrounds China as manufacturing activities edge higher, according to official Purchasing Managers’ Index (PMI) readings for November. Even with less stimulus activities to support growth, the economy has yet to fade. Earlier today, China announced an end to the initial public offering (IPO) freeze after banning it for 14 months, although it is not positive news for domestic equities due to the dilute effect. However, the Aussie and Kiwi cheered today.
The RBA will probably keep its benchmark interest rate unchanged at a record-low 2.5% tomorrow. The most likely scenario for the RBA meeting will be a “verbal attack” to minimize the Aussie rally opportunity.
Top News This Week
U.S. Non-Farm Payrolls
I expect figures to come in at 180K.
ECB Rate Decision
I do not expect a rate cut by the ECB.
Short AUDUSD at 0.92
Given the likelihood of verbal intervention in the RBA meeting tomorrow and another solid payrolls data report, I think investors may not have much optimism for the Aussie dollar.
Based on the AUDUSD H1 chart, the pair is still in a downtrend since 23 October, and 0.92 may offer some resistance based on the recent price reaction.
I would consider going Short on this pair once it rebounds to 0.92
Entry Price = 0.92
Stop Loss = 0.9265
1st Profit = 0.9160
2nd Profit = 0.9110
Previous Market Brief of the Week: Market Brief of the Week for 25 November 2013: Thanks to the Federal Reserve (Fed), the Dollar Is Nowhere
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