Market Outlook

17-12-19 Daily Forex Technical Research Report

AUD/USD

AUD/USD keeps losses after RBA minutes

  • AUD/USD continues to trade in the red after the Reserve Bank of Australia’s (RBA) December meeting minutes showed the board agreed to reassess economic conditions at the February meeting.
  • The board said the current wage growth is not fast enough to reach inflation, consumption goals and took note of the gloomy mood among consumers. The policymakers judged that stimulus from rate cuts outweighed any negative impact on confidence and stood ready to deliver further stimulus if required.
  • The central bank kept rates steady at 0.75% in December, having delivered three 25 basis point rate cuts earlier this year. Markets fear the RBA would hit the zero lower bound in 2020 and may have to do unconventional policies like quantitate easing.
  • The AUD/USD pair, which was already trading in the red at 0.6876, extended losses to hit a session low of 0.6868 after the RBA minutes. After all, the minutes were slightly dovish with the officials calling rate cuts as net positive for the economy and leaving the doors open for more stimulus.
  • As a result, AUD/USD could continue to bleed during the day ahead. The bearish pressures around the AUD will likely strengthen if the equities turn risk-averse. The futures on the S&P 500 are currently reporting a 0.14% loss. It’s worth noting that the pair failed to eke out gains on Monday despite the upbeat China data and Sino-US trade optimism – a sign of bull exhaustion.
  • The Australian dollar initially fell during trading on Monday, but then turned around to rally, only to give back gains again. Ultimately, the Australian dollar looks like it is essentially stuck in this area as there are a lot of questions as to what we are going to do going forward. Ultimately, the US/China trade situation has gotten better in the sense that we are not getting fresh tariffs over this past weekend. However, the path forward isn’t exactly clear. That will continue to weigh upon the Aussie dollar, and it’s likely that the Aussie dollar will show a little bit of lackluster behavior due to that. With that being the case, the market is likely to simply go back and forth, as traders don’t have a lot of faith.
  • AUD/USD trades near 0.6880 amid the initial Asian session on Tuesday. The pair manages to avoid losses on the previous day as broad US Dollar (USD)weakness joined welcome data from China and phase-one euphoria.
  • Downbeat figures of the United States (US) NY Empire State Manufacturing Index mainly dragged the greenback downwards on Monday. Adding to the benefits for the pair were China’s strong figures of Industrial Production and Retail Sales. Further, positive sentiment surrounding the US-China trade relations also contributed to limit further losses by the pair.
  • On the contrary, the Australian government’s downward revision to budget surplus in the mid-year economic forecast suggests weaker growth and slower wages relative to the April budget. As a result, traders remain on the back foot ahead of Thursday’s key employment numbers for November.
  • Risk tone has been upbeat after the recently agreed trade deal between the US and China. The US 10-year treasury yields surge to 1.87% at the end of Monday’s trading.
  • For the time being, minutes of the latest Reserve Bank of Australia (RBA) monetary policy meeting will be the key to watch. The recent weakening of the Australian economics might not be revealed from the minute statement but markets will seek clues of further rate cuts.
  • It should also be noted that there prevails less clarity about how the US and China would go along on the trade path. The same questions the pair’s strength and exert downside pressure. The South China Morning Post (SCMP) conveys that the Chinese business and former trade officials are wary of getting carried away from the phase-one success.
    Meghan Alexandra Administrator
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    Meghan Alexandra Administrator
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