It has been a positive day for the USD bulls as the FOMC minutes were hawkish and many on the committee saw a rate hike in July being a real possibility if the economy warranted it. Previously we've had mixed messages from the FED regarding all of this but in their eyes risk has diminished in the global economy. Despite all of this there is still a worry about inflation which has so far been lagging behind forecasts from the FED, if we saw further diminished inflation this could in turn cause the FED to pause but in reality this would just push back a further rate hike by a few months rather than stopping it all together, as the FED is looking more and more positive.
The S&P 500 however has failed to make any significant movements on the back of this, ending the day looking very flat as a result. After a brief push down to support at 2031 the market rallied later in the day to push it higher again. With the increased pressure though in a possible rate hike I would expect that we could see some very bearish movements in the future, as cheap money has been propping up the equity markets for many years now.
The Australian economy is one to watch in the short term as unemployment data is due out shortly and many are picking for a weaker AUD, with many expecting a jump in the unemployment rate to 5.8%. Any large jump here could warrant calls for the Reserve Bank of Australia to look to cut interest rates in the medium term and I would expect them not to hold back if given just cause. Either way expect the market to be looking to punish any AUD bulls if given the chance as the bears are currently having a field day when it comes to the AUDUSD.
On the charts the AUDUSD has technically been very bearish as of late and this very much a reflection of market fundamentals and sentiment. Currently the AUDUSD has pierced slightly through support at 0.7226 and I would anticipate this holding up around this area until the unemployment figures due out in a few hours. Any further falls from this level are likely to find support at 0.7150; a very strong level that has held since Jan-Feb.
Lastly, oil markets have had a surprising turn as a deficit was expected on the reduction in oil supplied to the US from the previous week with Venezuela slowing down and Canada's wild fires coming into play. However, we've had the opposite effect and a small surplus was recorded of 1.31M (-3.17M exp). The market has reacted aggressively in terms of selling and pushed down to 47.77, but this seems like it might be temporary and there are no technical's pointing to a bearish reversal at present.
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