AUSTRALIAN DOLLAR PRICE OUTLOOK EYES TRADE TALKS, RBA MINUTES: AUD/USD, AUD/JPY, EUR/AUD, GBP/AUD
- The Australian Dollar is edging lower as the US trading session comes online Monday morning following not-so optimistic trade talk headlines out of Beijing and rising Hong Kong tension
- AUD/USD dipped by about 0.25% following the latest US-China trade war news but the Aussie so far seems to be finding support around the 0.6800 handle
- AUD/JPY is currently fluctuating near session lows while EUR/AUD and GBP/AUD are extending intraday gains toward session tops
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The Australian Dollar is coming under pressure as trading begins in New York as market sentiment sours following the most recent US-China trade talk news report crossing the wires out of Beijing. ‘Shifting winds’ in the trade war narrative to a less pessimistic tone could deal a blow to risk appetite as the week progresses and keep AUD price action bogged down. Nevertheless, the ‘risk-off’ move is being cushioned by word that Fed Chair Powell was invited by President Trump to the White House to discuss “interest rates, negative interest, low inflation, easing and Dollar strength.”
Though a more cynical view of this developments cannot avoid considering the possibility that this unscheduled meeting called is more-or-less a move by POTUS to see if the Fed has his back with accommodative monetary policy US-China trade relations on the cusp of their next breakdown. A primary culprit owing to the recent rise in trade talk uncertainty stems from President Trump’s apparent unwillingness to rollback tariffs on Chinese goods, which China is demanding as a last-minute concession to seal a phase one deal that was originally expected to be finalized this week.
Another is the sharp escalation in Hong Kong protests over the weekend which is alarming some investors amid a growing risk of mainland China intervening to stop the protests. Meanwhile, US congress is fast-tracking legislation to provide support to pro-democracy protestors in Hong Kong, which could ‘muddy the water’ for Sino-American trade negotiators who are struggling to finalize a phase one deal.
AUD/USD PRICE CHART: DAILY TIME FRAME (JULY 11, 2019 TO NOVEMBER 18, 2019)
I noted at the end of October that the AUD/USD chart eyed a reversal, which seems to have come to fruition. Spot AUD/USD prices just dropped back below the 0.6800 handle momentarily, but the Australian Dollar quickly found support at this critical technical level. AUD/USD could struggle to sustain a rebound, however, with the 50-day simple moving average and downward sloping 9-day and 34-day exponential moving averages posing as upside obstacles. Although, the report of President Trump’s meeting with Fed Chair Powell has since sent the US Dollar swooning.
Check out the US Dollar Price Volatility & Implied Trading Ranges report for AUD/USD 1-week options implied trading ranges.
AUD/JPY PRICE CHART: DAILY TIME FRAME (JUNE 27, 2019 TO NOVEMBER 18, 2019)
AUD/JPY remains on its back foot after sinking to the 73.900 mark. Technical resistance is underpinned by the 23.6% Fibonacci retracement of the bullish leg etched out by spot AUD/JPY prices since late August in addition to the 8-day and 34-day EMAs. Yet the Australian Dollar might catch a bid as it approaches its ascending support line that connects the August 25, October 09 and November 14 intraday swing lows. Nevertheless, market sentiment continues to domineer the overarching trend of AUD/JPY.
GBP/AUD PRICE CHART: DAILY TIME FRAME (MARCH 08, 2019 TO NOVEMBER 18, 2019)
GBP/AUD price action jumped to session tops after the US-China trade talk headlines exacerbated strength exhibited earlier in the session with UK polls suggesting that PM Boris Johnson’s Conservative Party has widened its lead against the Labor party, which bolstered the Sterling. A material deterioration in US-China trade talks coupled with a growing probability that Brexit may soon be delivered could cause spot GBP/AUD prices to continue churning higher.
A Bollinger Band expansion could help facilitate a sustained advance, though the rising trendline extended through the March 14 and May 05 swing highs could keep upside limited with the RSI a smidgen below 70 and ‘overbought’ territory. At the same time, the prevailing bullish channel seemingly developed since mid-July could keep GBP/AUD prices more broadly afloat.
EUR/AUD PRICE CHART: DAILY TIME FRAME (JUNE 02, 2019 TO NOVEMBER 18, 2019)
The latest episode of Australian Dollar weakness is also being exhibited by spot EUR/AUD prices. EUR/AUD has climbed nearly 2% from month-to-date lows as US-China trade talks hit an impasse. Recent downside in the Australian Dollar has helped spot EUR/AUD prices breakout above its broad downtrend line extended from its August 06 and August 25 peaks. EUR/AUD now trades comfortably above the 1.6200 price level after eclipsing confluent resistance posted by the 61.8% Fibonacci retracement of the currency pair’s bullish leg from July’s bottom to August’s top.
RBA INTEREST RATE CHANGE PROBABILITIES (DECEMBER 2019)
While US-China trade talk headlines are currently dominating the Australian Dollar, the Aussie also stands to be impacted by RBA minutes due Tuesday at 00:30 GMT, which are expected to detail the central bank’s latest October policy meeting. That said, the Australian Dollar could come under further selling pressure if the RBA minutes reiterate a dovish bias and openness to providing further cuts to the OCR – particularly following the dismal Australian jobs report released last week. According to overnight swaps pricing, the probability of another RBA rate cut this year currently stands at 21.0%, which is up from 14.4% a week ago.
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