Australian Dollar Leaps on Yield Snap Ahead of RBA, BoE and Fed. Can AUD/USD Move Up?

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Australian Dollar, AUD/USD, RBA, BoE, Fed FOMC – Talking Points

  • The Australian Dollar finally seems to be benefitting from higher yields
  • APAC equities were mixed as tech misses have US futures lower
  • All eyes on central banks next week.Will AUD/USD resume its uptrend?

The Australian Dollar is pushing up again today as domestic yields gain at a blistering pace. This is due to the RBA appearing to have abandoned targeting 0.10% on the April 2024 Australian Commonwealth government bond.

It has traded above 0.80% today. On Wednesday, just prior to the Australian CPI number beat, it was trading at 0.25%. Further out the curve, Australian 10-year yields went as high as 2.12% from 1.85% yesterday.

Australian retail sales were better than expected at 1.3% m/m for September against 0.4% forecast.

Central banks globally appear to be transitioning from trying to stoke post-pandemic growth to reigning in inflation. The RBA, Bank of England and the Federal Reserve all meet next week to decide on monetary policy. All meetings are considered ‘live’ for a change in policy.

Asian equities were mixed today after Wall Street had a positive session. However, US futures are down after Apple and Amazon reported after the close and disappointed the market. Apple missed on revenue as supply constraints kicked in, while Amazon cited increases in the cost of labour and fulfilment for their miss.

US President, Joe Biden, announced a US$ 1.75 trillion tax and spending package, down from US$ 3.5 trillion originally proposed.

Japanese industrial production was -5.4% for September versus -2.7% expected. Two significant polls in Japan have the ruling LDP losing their outright parliamentary majority in Sunday’s election. The Yen and Nikkei 225 index were little changed on the day.

Evergrande reportedly made a bond payment to narrowly miss the deadline. Asian high yield bonds rallied as a result.

In commodities, coal continues lower as Chinese authority’s take measures drive the price down. Aluminium, copper and steel had solid gains overnight, while iron ore lost ground. Crude oil was steady.

Looking ahead, in the US there are personal spending numbers and the University of Michigan consumer sentiment gauge. Next week there are monetary policy meetings at the RBA, BoE and the Fed.

AUD/USD Technical Analysis

AUD/USD continues to trade within an ascending trend channel. It has stalled at the 200-day simple moving average (SMA), currently at 0.75571. Above that level is a previous high from June at 0.76167. These 2 levels could offer resistance.

On the downside, the recent previous lows at 0.74490 and 0.73788 might provide support. The 10-day SMA currently at 0.74923 may provide support, but a move below there could see bearish short-term momentum evolve.

Australian Dollar Leaps on Yield Snap Ahead of RBA, BoE and Fed. Can AUD/USD Move Up?

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

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