• USDJPY aims to break above 20-SMA ahead of the NFP report. Will it be successful this time?

• USDCAD stops at 5-month low as the focus turns to the BoC rate decision

• AUDUSD hangs near 8-month high; Australian GDP is on the calendar

 

Nonfarm payrolls, ISM PMIs --> USDJPY

USDJPY is looking for fresh buying as it is still striving for a close above the 20-day simple moving average (SMA) and beyond the 146.00 number. The next market mover could be the ISM manufacturing PMI survey due on Tuesday at 14:00 GMT, though Friday’s nonfarm payrolls report could generate stronger waves in markets.

Fed Chair Jerome Powell expressed support for a rate cut in September during his Jackson Hole speech, in response to recession fears stemming from July’s employment report and concerns that the central bank has maintained high interest rates for an extended period.

If the August report misses expectations by a wide margin once again, it could urge the central bank to cut interest rates more aggressively by 50bps in September, forcing the greenback to flip backwards again. In this case USDJPY could initially retest the 144.80 region ahead of the critical floor of 143.40 or dive lower to meet July's low of 141.67. A violation there could aggressively extend July’s downtrend towards the 137.80 number.

In the meantime, forecasts point to a stronger employment growth of 165k, with opinions ranging between 100k and 208k. Analysts also expect a slowdown in the unemployment rate to 4.2% and a pickup in average hourly earnings. Should the figures beat estimates, there is potential for an acceleration towards the 148.75-149.40 resistance area and then up to the 200- and 50-day SMAs currently converging to the 151.14-151.80 zone.

Note that the ISM non-manufacturing PMI is also on the agenda on Thursday along with JOLTs job openings and initial jobless claims.

 

BoC rate decision, Canadian jobs data  --> USDCAD

Canada will also report employment numbers on Friday, though the data might lose importance following the central bank's next policy decision this Wednesday.

Presently, there is 80% probability for a 25bps rate cut and there is a small group of investors who are pricing in a bold double reduction. The BoC has already lowered borrowing costs twice, and investors believe that this easing trend will persist until year-end. Hence, given the high rate cut expectations, this week’s policy announcement may not trigger shockwaves in the loonie  unless the board surprisingly opens the door to more aggressive reductions in the coming months.

USDCAD has been in doldrums throughout August, reaching a five-month low of 1.3437. A bounce above 1.3525 might be needed to improve market sentiment, though a steeper increase above 1.3585 would lift the price back to its previous range.

On the downside, the 1.3400 psychological mark will be watched ahead of January’s base of 1.3360 and the 1.3300 mark.

 

Australian GDP growth —> AUDUSD

Australian Q2 GDP data will not be missed on Wednesday after the recent vertical rally in AUDUSD, while China's Caixin services PMI could also affect the risk-sensitive Australian currency on the same day as the central bank is not planning to cut interest rates before mid-2025.

Forecasts are mixed, signaling a negligible quarterly economic improvement from 0.1% to 0.3% and an almost steady annual growth of 1.1%. Still, with forecasts being close to previous readings, there is always a probability of a surprise.

Stronger-than-expected readings could bring the bulls back into play after a short period of consolidation. If the 0.6800 bar gives way, the uptrend could stretch up to the 2023 double top area of 0.6880 and the 0.6910 barricade. The 0.6970 constraining zone from January 2023 could be the next challenge on the upside.

Alternatively, the pair could seek support near the key 0.6730 area. If the bears drive below 0.6700, the next pivot point could occur near 0.6650.