AUD/USD bounces toward 0.6500 after 200-DMA test – BBH

FXStreet Insights Team FXStreet

AUD/USD bounced back towards 0.6500 after testing support near its 200-day moving average (0.6458). The global equity market correction is weighing on AUD. The RBA Minutes of the November 4 meeting highlighted scenarios that could guide future policy decisions. Recall, at that meeting, the RBA voted unanimously to leave the policy rate unchanged for a second straight meeting at 3.60%, BBH FX analysts report.

RBA minutes highlight scenarios for holding rates

"According to the Minutes, three scenarios could lead the RBA to hold the cash rate target at its current level: (i) the emerging recovery in demand was stronger than expected, (ii) inflation remained high over coming months or productivity growth proved to be weaker than expected, or (iii) the Board changes its assessment that monetary policy was still slightly restrictive."

"The RBA also looked at two scenarios that may warrant additional rate cuts: (i) the labor market weakens materially from its current state, or (ii) households are more cautious about spending than assumed."

"The solid Australia October labor data supports the RBA’s scenario of keeping rates steady at 3.60% for some time. RBA cash rate futures imply roughly 50% probability of a 25bps cut to 3.35% in the next twelve months. Bottom line: there is room for Australia rate expectations to adjust in favor of AUD."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD revisits 1.3530; Dollar pushes harder

GBP/USD adds to the weekly correction and recedes toward the 1.3530 zone on Friday. Indeed, Cable faces increasing selling pressure on the back of extra gains in the Greenback, particularly fuelled by Chair Warsh’s speech at the Jackson Hole Symposium and the US NFP Annual Revision (-79K).

EUR/USD breaches below 1.1600, multi-day lows

EUR/USD now accelerates its decline and retreats to seven-day troughs in the sub-1.1600 region at the end of the week. The pair’s pullback comes on the back of the strong rebound in the US Dollar after Chair Warsh delivered a hawkish message in Jackson Hole, while the US NFP Annual Revision came in at -79K.

Gold seems vulnerable above $4,450 as Fed hike bets, Iran risks support USD

Gold recovers slightly from a one-and-a-half-week low, touched during the Asian session on Monday, though any meaningful recovery seems elusive. Fed Chair Kevin Warsh’s Jackson Hole speech was perceived as hawkish, raising expectations for a September rate hike. Adding to this, fresh US strikes on Iran keep the geopolitical risk premium in play, which acts as a tailwind for the safe-haven US Dollar and should cap the bullion.

Week ahead: RBNZ and BoC decide on rates ahead of all-important US NFP

The US dollar staged a modest recovery this week, perhaps as traders decided to cover some of their short positions amid slightly stickier or in-line US PCE inflation numbers for July, confounding expectations of softer prints amid the softness revealed in the CPI data for the month.

CFTC Report: CAD short covering leads; Gold buying surges

The week in one sentence: speculative positioning shifted more constructively in the week to August 25. CAD short covering led the move, followed by a broad reduction in EUR shorts and renewed Gold buying. GBP and VIX positioning also improved, while JPY positioning deteriorated and WTI flows diverged from weaker prices.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.