Australian Dollar, AUD/USD, Risk Trends, China, USTR– Talking Points
- Australian Dollar may continue its late-week rebound as APAC trading kicks off
- US Trade Representative set to announce China is not compliant with trade terms
- AUD/USD takes aim at the falling 26-day Exponential Moving Average (EMA)
Monday’s Asia-Pacific Forecast
Asia-Pacific markets look set for a quiet session Monday as investors eye a sparse economic calendar while preparing for a busy week.A week-long holiday in China will see bond and equity markets closed, which may see poor liquidity and higher volatility across APAC markets. The premier of New South Wales (NSW), Gladys Berejiklian, suddenly resigned Friday amid a corruption probe. Despite the political disruptions, the Australian Dollar’s late-weekrebound from Thursday may continue versus the US Dollar.
AUD/USD managed to climb higher on Thursday and Friday after setting a fresh September low. However, the currency pair is still down over 2.5% from its August high. That matched poor performances in equity markets last month as sentiment broke down. September’s FOMC meeting appears to have brought the potential for tighter monetary policy in conflict with equity valuations. Treasury yields surged following the Fed decision, offering investors a better yield on safe-haven government bonds.
Traders are set to continue with a cautious tone ahead of several potentially high-impact events this week. The US non-farm payrolls report on Friday is in sharp focus given the implications the print could have on monetary policy. Analysts expect to see 460k jobs added in September, according to the DailyFX Economic Calendar. That would be nearly double the August figure of 235k jobs. A miss on the highly-watched print could pull rate hike bets down.
It will also be a busy week for central bank decisions in the APAC region, with the Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) set to report monetary policy decisions. The RBA is expected to stand firm on a rate hike after Covid disruptions to the labor market in Q3, which RBA chief Lowe expected. The RBNZ, however, is likely to enact a 25 basis point hike to 0.50% from 0.25%, which will mark the first major central bank in the region to tighten interest rates.
Outside the US NFP report and rate decisions, this week’s most prominent issue is likely to come out of Wall Street’s Monday session. CNBC reported—citing people familiar with the matter—that the United States Trade Representative, Katherine Tai, will announce that Beijing is not in compliance with the phase one trade deal negotiated between Beijing and Washington by the previous Trump administration. The USTR is reported to be investigating potential responses to the breach – which could include additional tariffs. The announcement may spark market volatility in the Australian Dollar. USD/CNH may also be key in gauging a reaction to the USTR announcement.
AUD/USD Technical Forecast
AUD/USD printed a Bullish Engulfing candlestick on Friday as prices accelerated higher from the September low at 0.7166. The falling 26-day Exponential Moving Average (EMA) is a potential point of resistance for bulls. Bears will aim for the September low if prices turn lower. MACD is pointing higher after crossing above its signal line late last week, indicating healthy upward momentum on the 8-hour timeframe.
AUD/USD 8-Hour Chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwateron Twitter