SYDNEY: The Australian and New Zealand dollars slipped on Monday after ending August with hefty gains, with investors eyeing US jobs data for clues into the size of the anticipated September Fed rate cut, as well as local economic data.
The Aussie held at $0.6762, having scaled a fresh eight-month top of $0.6823 last week which left it 3.4% firmer last month.
Major resistance lies at $0.6871, a peak from last December, while support is around $0.6752 and $0.6705.
The kiwi dollar eased 0.2% to $0.6239, having reached an eight-month high of $0.6298 last week.
It was up a 5.1% last month, with support around $0.6230.
The pair were pressured by a rebound in the dollar on Friday after upbeat spending figures led markets to trim the chance of a half-point easing from the Federal Reserve.
Futures are 100% priced for a cut of 25 basis points on Sept. 18, and imply a 33% probability of 50 basis point.
The Commonwealth Bank of Australia predicts the Aussie could fall towards 67 cents if markets move to price closer to a 25 bp cut by the Fed in September.
The National Australia Bank said their model estimate for the local currency is close to the top of its fair value.
“AUD/USD will be volatile this week in response to the release of key US labour data… Overall, we expect the US labour data to show resilience and encourage the market to price a 25bp cut, supporting the USD,” said Joseph Capurso, head of international economics at the CBA.
TD Securities on Friday entered a short position on the kiwi dollar, in part due to the soft economic growth in New Zealand and stretched short-term valuation.
Australia, NZ currencies hold hefty monthly gains as US dollar wanes
It targets 60 cents in about 1-2 months.
All eyes are on the US payrolls report on Friday but before that, traders will have to digest data expected to show weakness in Australia’s economy and a speech from the Reserve Bank of Australia Governor Michele Bullock on Thursday.
gross domestic product data out on Wednesday will likely show that the economy grew a meagre 0.3% in the second quarter, following a 0.1% rise in the March quarter.
The subdued growth has been largely expected but a negative print could move the dial on rates.
Data out on Monday showed that inventories would subtract about 0.5% off the GDP last quarter, while building approvals bounced in July thanks to a surge in apartments.
Home prices climbed for a 19th straight month.