Good morning traders

With US markets having a long weekend for Labor Day, we didn’t quite get the action that the news in the world suggested we might. Since Friday we’ve had nonfarm payrolls and of course the escalation of tensions with North Korea that have been covered in depth by the whole team.

Today our focus moves back onto the Central Banks, with particular interest in Australia and the RBA. Predictions are for rates to be kept on hold and I personally can’t see a hike at this point in time. However the key will be with the accompanying policy statement and if there is a change in tone. Specifically we want to know if there is a more hawkish feel to what is said and therefore a chance that rates might increase faster than what is currently being predicted.

Traders should also be paying attention to Services PMI out of China along with more Aussie data with the Current Account.

Is the the Top in the AUD?

I’ve been calling for a top in the AUD/USD for weeks now. However in the short term the Aussie has had other ideas. Any hawkish tone in the statement will be an opportunity for the AUD to spike into the 0.8000 region. To me that’s when things get fundamentally too expensive.

Of course the RBA won’t want to inflate the AUD any further as it hurts exports. So keep that in the back of your mind.

On a longer term level I’m prepared to sell spikes in the AUD/USD above 80 cents. Just keep in mind that this is a longer term play. Ultimately relative interest rates will be key drivers of all FX markets and this trade assumes that the US will hike rates faster than Australia.

Key Levels