Aussie slide continues

Kenny Fisher MarketPulse

Australian dollar woes continue

The Australian dollar has extended its downswing, posting sharp losses on Friday. Currently, AUD/USD is trading at 0.7135, down 0.74% on the day. It is not looking pretty for the currency, which is having another week to forget. AUD/USD is down 1.34% this week and November has been ugly, with the currency losing 5.11% this month.

The emergence of a variant of Covid-19 in South Africa is causing jitters in the financial markets. We’re seeing a risk-off, flight to safety by investors, with risk currencies like the Australian dollar taking a beating. An excellent reading from Australian Retail Sales for October has not been enough to stop the Aussie’s slide. Retail Sales jumped 4.9% in October m/m, as the reopenings in New South Wales and Victoria resulted in a consumer spending spree.

The Australian dollar is also under pressure as the Federal Reserve is expected to accelerate tapering of its pandemic bond purchase programme. Goldman Sachs said in a note on Thursday that it expects to Fed to double its taper trim from USD 15 billion to USD 30 billion each month, starting in January. This means that the programme will be wound up by March instead of June. An earlier timeline means that the Fed can look at raising rates sooner, which is bullish for the US dollar.

We continue to see a disconnect between RBA guidance and market pricing. Governor Lowe has stated that he will not raise rates until 2023 or perhaps 2024. The markets have ignored Lowe and have priced in three rate hikes for next year. Lowe has pushed back against the market expectations, but with no success. There are two factors which favour raising rates sooner rather than later. First, inflation is moving higher, although it is still within the RBA’s target. Second, the Australian dollar is falling fast and is moving towards the key 70 level. The RBA may consider raising rates if it feels that the exchange rate is falling too low.

AUD/USD technical

There are resistance lines at 0.7328 and 0.7422.
AUD/USD has broken below support at 0.7184 and is testing support at 0.7134. Below, we find support at 0.7040.

Author

Kenny Fisher

MarketPulse

A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.