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AUD slumps on China downgrade fears, RBA on hold

Summary

The Dollar Index (DXY), a favored gauge of the Greenback’s value against a basket of 6 major currencies, rebounded to 104.05, a key level (103.25 yesterday).

Economic data released yesterday saw US JOLTS Job Openings decline to 8.73 million from 9.35 million previously. The monthly Job Openings and Labor Turnover Survey was the lowest level since March 2021.

However, the US ISM Services PMI soared to 52.7, from 51.8 previously, surpassing expectations of 52.2. Service sector growth in November hit a three-month high.

The Australian Dollar (AUD/USD) slumped to 0.6555 (0.6625) after the RBA kept its Cash Rate unchanged at 4.35%. Markets perceived the move as a dovish hold despite the RBA’s language.

Against the Japanese Yen, the Dollar edged up to 147.30 from 146.80. The latest Bank of Japan inflation report saw Annual Tokyo Core CPI fall to 2.3% from 2.7% previously and forecasts at 2.4%.

The Euro (EUR/USD) tumbled to 1.0785 from 1.0845, below the 1.0800 support level. Eurozone Final Services PMI beat expectations however broad-based US Dollar strength weighed on the Euro.

Sterling (GBP/USD) dipped to 1.2585 (1.2625), its lowest in a week. The British currency was pounded by the overall stronger Greenback. UK Services PMI beat forecasts, at 50.9 from 50.5.

The Dollar was moderately higher against the Asian/EMFX. However, the USD/CNH (Dollar-Offshore Chinese Yuan) pair soared to 7.1735 (7.1285) after Moody’s warned it may downgrade China.

USD/THB (Dollar-Thai Baht) rallied to 35.30 from 34.85. Against the Singapore Dollar (USD/SGD), the Greenback finished at 1.3415 (1.3330).

AUD/USD – The Aussie Battler slumped against the overall stronger US Dollar to 0.6555 from 0.6625 yesterday. Overnight low traded for the AUD/USD pair was at 0.6544. The Australian Dollar was changing hands against the Greenback at 0.6625 yesterday.

EUR/USD – The Euro tumbled against the US Dollar to 1.0785 (1.0845), breaking through the 1.0800 support level. In choppy trade, the overnight low recorded was at 1.0778. The shared currency traded to an overnight high at 1.0847.

USD/JPY – Against the Japanese Yen, the Greenback rallied to close in New York at 147.30 (146.80). The overnight high recorded for the USD/JPY pair was 147.39. The USD/JPY pair traded to an overnight low at 146.56.

GBP/USD – Sterling slid against the US Dollar to 1.2585 from 1.2625 previously. The British Pound rallied to an overnight high at 1.2652 before sliding lower. The overnight low traded for the GBP/USD pair was at 1.2578.

On the lookout

Today’s economic calendar picks up, kicking off with Japan’s Reuters December Tankan Index (f/c 8 from 6 – ACY Finlogix).

Australia follows with its Australian Q3 GDP Growth Rate (q/q f/c 0.4% from 0.4%; y/y f/c 1.8% from 2.1% - ACY Finlogix).

Germany starts off Europe with its October Factory Orders (m/m f/c 0.2% from 0.2%). The Eurozone follows with its October Retail Sales (m/m f/c 0.2% from -0.3%; y/y f/c -1.1% from -2.9% - ACY Finlogix).

The UK releases its November Global Construction PMI (f/c 46.3 from 45.6 – ACY Finlogix) and the Bank of England’s UK Financial Stability Report.

The US releases its November ADP Non-Farms Employment Change (f/c 130K from 113K – FX Street).

The Bank of Canada has its Monetary Policy meeting and Statement. Canada also releases its IVEY PMI Index for November (seasonally adjusted f/c 54.2 from 53.4 – FX Street).

Trading perspective

The Dollar rebounded against most of its peers following several days of losses. Weaker finishes in the Euro (EUR/USD), Aussie (AUD/USD) and Sterling (GBP/USD) lifted the Greenback.

Expect the Dollar to retain its bid tone against its peers in Asia today as markets prepare for the US Payrolls report on Friday. FX volatility will remain high, so keep those tin helmets on.

AUD/USD – Look for immediate support in the Aussie Dollar today at 0.6540 (overnight low traded was 0.6544). The next support level lies at 0.6510. On the upside, immediate resistance can be found at 0.6585, followed by 0.6610. Look for another choppy trading day in the Aussie, likely between 0.6520-0.6620. Prefer to buy dips, market feels oversold.

AUDUSD

(Source: Finlogix.com)

EUR/USD – The shared currency fell against the overall stronger Greenback to 1.0785 after it broke through the 1.0800 level. Look for immediate support at 1.0750 followed by 1.0720. Immediate resistance can be found at 1.0810, 1.0840 and 1.0870. Look for the Euro to trade in a likely range today of 1.0750 to 1.0850. Trade the range.

USD/JPY – Against the Japanese Yen, the US Dollar finished at 147.30 (146.80 yesterday). Today look for immediate resistance at 147.60 followed by 147.90. Immediate support lies at 147.00, 146.70 and 146.40. Look for the USD/JPY pair to consolidate in a likely range today of 146.50-147.50. Trade the range, nice and wide.

GBP/USD – Sterling slid against the overall stronger Greenback to 1.2585 (1.2625). Look for immediate support in the British Pound at 1.2570 (overnight low traded was 1.2578). The next support level is found at 1.2540 and 1.2510. Immediate resistance is found at 1.2610 and 1.2640. Expect the GBP/USD to consolidate in a likely range of 1.2570-1.2670. Preference is to buy Sterling on weakness.

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