Australian Dollar Floored by Booming US Dollar as Rate Hikes Ricochet Through Markets

Australian Dollar, AUD/USD, ASX 200, NZD, US Dollar, USD/JPY, EUR/CHF – Talking Points

• The Australian Dollar has wilted in the face of a robust US Dollar
• APAC equities have been dusted by risk aversion fever taking hold
• After a busy week of rate hikes, will USD keep going north, sending AUD south?

The Australian Dollar is under pressure again today after making a 2-year low yesterday as risk assets struggle in the aftermath of the Fed’s rate hike on Wednesday.

In the aftermath of the Fed’s 75 basis point hike on Wednesday, Treasury yields leaped higher in the North American session overnight. This further boosted the US Dollar, driving AUD/USD lower. The Kiwi has been caught up in the same vortex and is also near a 2-year low.

USD/JPY had a look under 142 early in the Asian session but has steadied back above that level as markets take on board the Bank of Japan’s intervention yesterday. It is a Japanese holiday today.

Sterling continues to press for fresh lows despite the Bank of England hiking rates by 50 basis points yesterday. GBP/USD hasn’t traded at these levels near 1.1200 since 1985.

EUR/CHF is inching above 0.9600 at the time of going to print after yesterday’s 75 basis point lift by the Swiss National Bank.

APAC equities are a sea of red following on from another down day on Wall Street. Australia’s ASX 200 has been the hardest hit, down over 2%.

The VIX index, a measure of volatility on US stocks, has steadied near 27 after spiking over 30 after the Fed’s rate hike. It is still a long way from the high of 39 seen at the start of the year.

Crude oil is steady again so far today with the WTI futures contract near US$ 83 bbl while the Brent contract is a touch below US$ 90 bbl. Gold remains range bound, trading around US$ 1,670 an ounce.

Looking ahead, after a plenitude of European PMIs, Fed Chair Powell will be making remarks as well as Vice Chair Brainard and board member Bowman. The ECB’s Nagel and Swiss National Bank’s Jordan will also be crossing the wires.

The full economic calendar can be viewed here.

AUD/USD TECHNICAL ANALYSIS

AUD/USD continues to languish near a 2-year low and it remains within a descending trend channel. The low of 0.6574 was the lower bound of the channel and it may provide support going forward.

The price is below all short, medium and long term simple moving averages (SMA) and all SMAs are displaying a negative gradient. This may suggest that bearish momentum could continue to evolve.

Resistance might be at the break points of 0.6671, 0.6682 and 0.6699

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter