Originally published by AxiTrader
Quick Recap
After being hammered back from the supply zone above 77 cents on Thursday night the Australian AUD/USD dollar opens the week around 0.7540. That's just above the accumulation zone between 0.7480/0.7220 where traders have been happy to buy Aussie recently.
Will that buying still be present, or have concerns about the Fed increased to a high enough level to see the buyers step back and wait. Time will tell in what is a big week for data and events.
What You Need To Know
Having again found the supply zone above 77 cents unsustainable the Australian dollar ended the week under renewed pressure. That saw it collapse to end the week at 0.7540 after the USD continued to strengthen and amid a generalised risk off mood in markets as bonds rose and stocks collapsed.
The week's close has left the Aussie resting on important trend line support that stretches back to last May's low around 7150. 
The question of what's next for the Aussie relies in no small part on the markets feeling about quantitative easing in general and the decision by the Fed at this month's meeting.
Although it is still a week and a half away the Fed has been consistently warning that it could increase its rate on September 21. Markets favoured ignoring these warnings after weaker than expected non-farm payrolls, manufacturing and services PMI data was released. But, Fed speakers have, for the most part, continued to suggest the case for higher rates has been made.
Specifically, Eric Rosengren president of the Boston Fed and Robert Kaplan from Dallas both said Friday the market has been warned. Kaplan commented that “I think the markets have gotten plenty of notice that we are looking for opportunities to remove accommodation,". While Rosengren said “a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy”. That Rosengren is considered a dove by many market players is partly why the odds of a Fed hike, as measured by the CME Fed Watch tool, have risen to 24% from 15% at one point last week.
My own sense is that the odds are closer to 60:40 in favour of a hike because the Fed has warned traders, the US economy s expanding reasonably well, the Fed wants to normalise rates consistent with the economic outlook, and along with warnings of a rate hike we have heated this will be a very shallow cycle.
Bringing it back home, while where the US dollar and stocks head remains important for the Aussie and its crosses three key events in Australia are worth watching this week.
- RBA assistant governor Chris Kent is talking on Tuesday morning and could give a lead in his thinking about where the economy is now.
- The NAB business survey will take the pulse of just how businesses in Australia are travelling. It's also out Tuesday and I'll be looking closely to see if last month’s falls in confidence, conditions and some of the key sub-indexes like trading, profitability, and employment confirm or deny recent high-frequency indicators suggesting the Australian domestic economy is slowing.
- Australia's August jobs data is out Thursday with pundits expecting a print of 15,000 jobs and an unemployment rate of 5.7%. It's a volatile series but closely watched by Forex traders.
It sets up a big week as does the Aussie dollar chart which shows the currency is sitting at a critical juncture.
For the moment levels around 75 cents have been the accumulation zone for traders. A break would be big news. That means the August low of 0.7487 is in some ways even more important that the trendline the Aussie is resting on. A break would signal that the run above 77 cents represents an important high.
Short term the 4-hour charts, as is often the case on a Monday morning, suggest we could see a recovery toward 0.7600 if the 0.7520/40 region holds.
Here's the chart.
Have a great day's trading
Greg McKenna
Chief Market Strategist AxiTrader