Market Spotlight: Factors Driving The Aussie
Aussie Slips on Fresh USD Rally
The failure at the bear channel top in the Aussie runs the risk of seeing the current 2022 downtrend continue. The Aussie was one of the key beneficiaries of the move lower in USD over the last fortnight and the recent rebound has weighed sharply on AUD, fuelling a quick unwinding of late longs. Recent hawkish Fed commentary and better-than-forecast US data is underpinning USD here, casting shadows over the near-term outlook for the Aussie. This week’s FOMC minutes will be closely watched. If the Fed is seen to be more open to a lower hike in December, this should help curtail the USD rally, allowing AUD to recover. However, if the Fed is seen to be more hawkish than expected in its outlook, this will certainly drag AUD lower.
China COVID Impact
News this week of 2 new covid deaths in Beijing is also adding to fears of fresh lockdowns in China which would be highly bearish for AUD given the importance of Chinese demand for Aussie exports. The China reopening story has been a key upside driver of risk assets recently. If this outlook starts to alter round further covid deaths and heightened lockdown fears, this will be heavily bearish for AUD. However, if China is seen to handle the outbreak without fresh lockdowns, keeping the reopening narrative intact, this will be bullish for AUD near-term.
Technical Views
AUDUSD
The rally off the YTD lows has seen the market trading back up to test the top of the bear channel which is holding for now. With momentum studies still bullish, the breakout above .6535 is important and while price holds above this level, risks of a channel break remain elevated. However, should price move back below this level, a resumption of the longer term downtrend looks likely.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.