EUR/AUD bears on top ahad of US NFP

• EUR/AUD downside playing out ahead key US data.  
• Cross  can continue lower on the prospects for further easing from the European Central Bank.

EUR/AUD has been extending its downside from a touch below the 1.68 handles and has gone on to take out the 61.8% Fibonacci with sights on the 78.6% retracement down at 1.6087. EUR/AUD is currently trading at 1.6198, flat for the day so far as markets consolidate ahead of the grand finale in the US jobs data in the New York session.  

EUR/AUD can continue lower on the prospects for further easing from the European Central Bank, despite the probability of that the Reserve Bank of Australia is also on the verge of cutting the OCR – Observers are expecting the next cut in the OCR to come as soon as October.

“We expect the RBA to keep the cash rate on hold at 1%. OIS is virtually priced for this and polls are unanimous. We are paid Sep’19 OIS. RBA forecasts assume 2 further cuts, which we expect in Nov’19 and May’20. The risk to our forecast is for the Bank to pull the trigger earlier, not later. The Bank is likely to reiterate it remains open to cutting further ‘if needed’. ‘Additional evidence’ such as poor Q2 GDP after this last week’s poor Q2 construction and building approvals data could trigger an Oct cut,” analysts at TD Securities explained.  

US NFP in sight

Meanwhile, markets are now looking to tomorrow’s US Nonfarm Payrolls data as the next probable catalyst to tip the cross over on the back of further weakness in the euro. As a prelude to the jobs data today, overnight, the August ADP report was quite a bit stronger than expected:

“Private payrolls rose 195k vs 142k in July (156k). The data supplemented the initial claims data for the NFP survey week and suggest a solid non-farm payrolls number tomorrow – the median expectation is 160k. The data imply the labour market, particularly service-producing jobs (+184k), is weathering the tariffs well. Without a downturn in private service-sector jobs in the US, history shows that a recession is very unlikely,”

analysts at ANZ Bank explained.

EUR/AUD levels