AUD/USD falls alongside iron ore and bitcoin as China ramps up lockdown measures

Thursday’s Asia-Pacific outlook

• The US

US stocks fell on Wednesday as fallout from the failed deal between Binance and FTX roiled crypto markets, sending Bitcoin lower by nearly 15% to the lowest since November 2020. The Wall Street Journal reported that Binance intended to abandon the deal announced yesterday to acquire FTX.

Binance confirmed the news on its Twitter handle, citing corporate due diligence and recent investigations opened by US regulators.

The battle for control of the US House and Senate remains underway, but the projected red wave failed to materialize. The President’s party almost always loses seats in midterm elections. Democrats are slightly favored to retain Senate control, but their odds for the House are slim. Georgia will head to a run-off in December, potentially keeping the Senate’s fate unknown until then.

Still, the chances for fiscal spending will decline unless Democrats pull off a big surprise in the remaining House races. Treasury yields fell across the curve as bond investors moved into the market.

• China

Lockdowns across China increased as cases rose, which dragged on demand-sensitive crude oil prices.

A surprise inventory build in the US also weighed on the commodity. China’s Guangzhou, a factory-heavy city of nearly 20 million, increased mass testing measures, with over half of the city under restrictions.

Despite the situation, Chinese property developers surged on Wednesday after the renewal of a credit support program. The Chinese yuan fell 0.5% against the dollar.

• Australia

Australia’s inflation expectations for November will cross the wires today. AUD/USD fell as Iron Ore prices slipped. The Reserve Bank of Australia Deputy Governor Michele Bullock pushed back against claims that the central bank wasn’t being tough enough on inflation, but it didn’t do much to spur rate hike bets.

The Australian dollar’s direction will likely remain tied to China’s Covid situation over the short term.

Notable events for November 10:

• Philippines – GDP Growth Rate QoQ (Q3)
• Thailand – Consumer Confidence (Oct)
• Japan – Machine Tool Orders YoY (Oct)
• China – Vehicle Sales (Oct)

Australian dollar technical outlook

AUD/USD fell from its 50-day Simple Moving Average (SMA), which coincides with the Cup and Handle pattern’s handle top. Further downside is likely on the table as the Relative Strength Index tracks below its midpoint on the daily timeframe.

AUD/USD daily chart

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