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7/12/2021 Tuesday

Good Morning,

 

Welcome to our daily market update where we help keep you informed on the latest happenings in the world of FX and show you what this means for the Mighty Aussie Dollar.

If you have any questions or would like anything further explained, please don’t hesitate to reach out to your account manager or email info@cafx.com

 

Key Data Being Released Today Tuesday the 7th of December 2021

  • CNY – Trade Balance
  • EUR – German Industrial Production
  • AUD – Cash Rate
  • AUD – RBA Rate Statement

 

 

The Aussie Dollar – Fundamentals

Today the market is focused on the RBA, not so much the cash rate, which is unlikely to move, but the accompanying statement.  Despite the recent decline in Aussie Dollar, analysts at MUFG Bank (Japan’s Largest Bank), consider there is still scope for some further downside over the short-term. The see the Reserve Bank of Australia (RBA) is set to remain dovish. “While we believe the RBA will have to hike sooner than the RBA’s current guidance of 2024, we doubt there is a compelling need to shift the guidance at this stage.” And “AUD/USD is now down 8.25% year-to-date and at these levels is beginning to look stretched. However, with such a stark monetary stance, there is scope for some further downside over the short-term.”

 

Having shown some resilience below the key 0.7000 psychological mark, the AUD/USD pair witnessed some short covering on Monday and recovered a part of the previous day’s losses to a fresh YTD low. The global risk sentiment stabilized a bit in reaction to reports from South Africa, suggesting that Omicron patients only had relatively mild symptoms. This, in turn, led to a strong recovery in the equity markets and benefitted the perceived riskier Aussie Dollar .

 

The upbeat market mood got an additional boost after the People’s Bank of China (PBOC) slashed the bank’s Reserve Requirement Ratio (RRR) by 50bps, releasing 1.2 trillion-yuan long-term liquidity. Despite the supporting factors, the uptick lacked bullish conviction amid the prevalent bullish sentiment surrounding the USD. The prospects for a faster policy tightening by the Fed acted as a tailwind for the greenback and might cap gains for the AUD/USD pair.

 

 

The Aussie Dollar – Technical Analysis

The Aussie Dollar tested and bounced off the psychological and technical level of 0.7000. we will be watching the Asian session today with interest to see if the market will reset this level after the RBA statement.

 

Resistance on the Top Side – If the market rebounds higher resistance will start at 0.7110, then 0.7172 and 0.7300.

Support on the Downside –   We will be watching the market very closely today to see if it will test the key technical and psychological level of 0.7000. If the market breaks 0.7000 continues to fall there is the support at 0.6921 and then at 0.6800.

 

 

AUD/USD Daily Chart

 

 

DXY (USD INDEX) Daily Chart

 

Major Global Markets

  • Stocks
    • S&P 500 closed at 4591
    • NASDAQ closed at 15850
    • ASX 200 closed at 7245
  • Currencies
    • AUD/USD – At the time of writing this report trades at 0.7050
    • AUD/JPY – At the time of writing this report trades at 80.03
    • AUD/CNH – At the time of writing this report trades at 4.4929
    • DXY (US Dollar Index) – At the time of writing this report trades 96.294
    • AUD/EUR – At the time of writing this report trades 0.6249
  • Bonds
    • US 10-year Bonds are currently at 1.433
    • Aussie 10-year Bonds are currently at 1.615
  • Commodities
    • Iron Ore 62% – Trading at USD/T 103.74
    • Gold – trading at USD/OZ 1777
    • Brent Crude Oil – Trading at USD/Bbl 73.72

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