AUD/USD May Rise After PMIs Reveal Robust Recovery as Vaccination Rates Swell

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Australian Dollar, AUD/USD, Jerome Powell, Oil, Technical Forecast – Talking Points

  • Australian Dollar falls against USD as Powell renomination hits Treasuries
  • Encouraging PMI data for November shows the Aussie recovery is brightening
  • Oil prices bounce before hitting September levels as traders eye inventory
  • AUD/USD approaches the key 0.72 psychological level as technical weaken

Tuesday’s Asia-Pacific Forecast

The Australian Dollar weakened overnight versus the US Dollar after President Joe Biden renominated Jerome H. Powell as chair of the Federal Reserve. Mr. Biden’s move was largely expected, although bets for the underdog, Lael Brainard, were growing in recent weeks. Instead, Ms. Brainard was nominated for the vice chair position, which disappointed some progressives. Rate hike bets shifted higher on the news.

AUD/USD may see some upside today after Markit Economics revealed growth in Australia’s services sector via the purchasing managers index. The November Services PMI Flash crossed the wires at 55.0, up from 51.8. That was the highest figure since June before widespread lockdowns went into effect. Manufacturing activity also increased, rising to 58.5 from 58.2. The data is an encouraging sign for the Aussie economy as the country’s vaccination rate soars.

Markets applauded the continuity at the Fed, with stocks rising through most of the day. However, prices fell sharply into the close, with tech-heavy Nasdaq 100 index (NDX) closing 1.16% lower. Treasuries saw heavy selling following Biden’s announcement. The rise in yields – bond yields rise when prices fall – is what likely weighed on technology stocks, which are sensitive to interest rate bets. The Dow Jones managed to add 0.05% on the day.

AUD/USD’s weakness wasn’t the result of a risk-off move initially, but rather US Dollar strength as the market unwound its dovish bets over Brainard’s small chance of leading the Fed. The broad-based US Dollar DXY index rose to a fresh yearly high, eclipsing the 96.5 level. Outside the Greenback, the Aussie Dollar performed relatively well, gaining against the safe-haven Japanese Yen and Swiss Franc.

Elsewhere, crude oil prices bounced from six-week lows after the commodity started to see some buying pressure overnight. Energy traders are assessing potential releases from state reserves in China and further news over the US coordinating its release. Weekly inventory figures from the American Petroleum Institute (API) and the Energy Information Administration (EIA) will be on the radar over the next 48 hours.

AUD/USD Technical Forecast

AUD/USD’s move lower has prices within striking distance of the 0.72 psychological level, which may provide a strong area of support. The September low sits below that if prices continue the bearish trajectory. The recent weakness has seen the 20-day Simple Moving Average turn lower, with the current course nearing a crossover below the longer-term 50-day SMA. An intersection between those two SMAs is a bearish signal.

AUD/USD Daily Chart

aud-usd chart

Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwateron Twitter

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