It is Thanksgiving in the US is on Thursday and many investors will be taking Friday off to make it a long weekend break. This means that nearly all of this week's US data was squeezed into today's session. Unfortunately, the data dump painted a mixed to disappointing picture for the world’s largest economy. Jobless claims disappointed expectations and the latest estimate of third-quarter economic growth was bang in line with the estimates. Durable goods orders and new home sales both beat, but personal income unexpectedly fell. Investors were looking forward to the publication of the Fed last meeting minutes due at 19:00 GMT.
US data recap:
- New applications for jobless claimed rose for the second straight week, increasing by 778,000 vs. 732,000 eyed
- Q3 GDP (second estimate) was unchanged at 33.1% as expected
- Durable goods orders rose 1.3% vs. 1.0% expected
- New home sales beat at 999K vs. 972K annualized unites expected
- Personal spending rose 0.5% vs. 0.4% expected, but personal income fell 0.7% vs. a flat reading expected
Today’s unemployment claims data has fuelled concerns that a renewed economic downturn has begun thanks to the latest lockdowns. Many businesses have closed down during the pandemic for good and many jobs will never return. Against this backdrop and the potential for taxes to rise under the Biden administration, and even with the help of vaccines, there will be question marks over the speed of the recovery and pent-up demand in 2021. Consequently, we may not see as sharp a recovery as has been priced in by financial markets over the past several months. This should mean lower Fed interest rates for longer, keeping the pressure on the greenback. Speaking of the devil, the Fed’s last policy meeting minutes are due at 19:00 GMT. Don’t expect any fireworks, as several FOMC policymakers have already spoken since their last policy meeting took place.
AUD/USD looking bullish
With the US dollar remaining under pressure, and stock markets supported, the risk-sensitive Aussie dollar could extend its gains further this week. The AUD/USD has broken above a short-term consolidation range after spending several days there, holding for the most part near the recent highs. In other words, the bulls have remained largely in control of price action and as such I expect to see fresh highs for the year as outlined on the chart:
Source: ThinkMarkets and TradingView.com
However, in the event of a false breakout, the bulls will be in trouble – especially if rates break the most recent low around 0.7220ish. Under this potential scenario, we could see a quick drop back towards – and possibly below – the key 0.700 handle.
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