AUD/USD: Hard landing fears and RBA to weigh on the aussie – MUFG

Matías Salord FXStreet

Analysts at MUFG Bank see the AUD/USD pair falling back toward 0.6000 from current levels on the back of global recession fears, and a wider divergence between the Federal Reserve and the Reserve Bank of Australia (RBA).

Key Quotes:

“We continue to expect the USD to strengthen further in the near-term as global financial conditions continue to tighten. The much stronger-than-expected US CPI report for September has reinforced our view that it is premature to expect a dovish Fed policy pivot. The Fed remains on track to continue faster rate hikes through the rest of this year.”

“The sharp tightening of financial conditions will reinforce fears over a hard landing for the global economy which is dragging raw industrial commodity prices closer to bear market territory. The RBA acknowledged that global slowdown risks are becoming more important in setting monetary policy at their last policy meeting, and slowed the pace of rate hikes. A wider policy divergence between the Fed and RBA in the near-term will reinforce downward pressure on the AUD.”

“We expect the AUD/USD to fall back towards the 0.6000-level and closer to the COVID lows from March 2020. One potential risk to our short trade idea is posed the upcoming Communist party Congress in China if it signals a shift to more growth friendly policies such as easing the strict zero-COVID strategy.”

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

EUR/USD looks to regain the 200-day SMA

EUR/USD regains some balance and trade just above 1.1600 the figure ahead of the opening bell in Asia. The pair initially dipped to the 1.1530 zone for the first time since November, always following the stronger US Dollar and the marked flight-to-safety in the context of the ongoing Middle East crisis

GBP/USD attacks 1.3300, refreshing three-month lows

GBP/USD is deep in the red near 1.3300, accelerating its downside to renew three-month lows in European trading on Tuesday. The ongoing escalation in the Iran war, combined with rising Oil prices, weighs negatively on the higher-yielding Pound Sterling as the US Dollar capitalizes on increased haven demand.

Gold bounces off lows, back above $5,100

Gold remains on the defensive, eroding part of the recent multi-day advance and managing to trade back above the $5,100 mark per troy ounce on Tuesday. The precious metal initially dropped just below the critical $5,000 threshold on the back of the persistent strength of the Greenback, higher US Treasury yields across the curve and investors' repricing of Fed rate cuts.