AUD/USD: hawkish RBA and China's new budget
Despite global financial uncertainties and Middle East conflicts, the AUD/USD pair outperformed last week. What's behind its resilience?
Surprising resilience: AUD/USD defies risk-aversion
A notable end to last week saw the AUD/USD outperform, despite a wave of risk-aversion flows that hit the asset market ahead of the weekend. Concerns around higher bond yields and conflict in the Middle East were key drivers.
Hawkish turns: RBA signals and robust data
The AUD/USD's strong performance last week followed a series of hawkish RBA communiqués, initially observed in their meeting minutes released in mid-October, and a string of stronger-than-expected economic data, including:
- In September, the unemployment rate fell to 3.6%, compared to an expected 3.7%
- Q3 trimmed mean inflation increased to 5.2% YoY, versus 5.0% expected
- Q3 PPI rose by 1.8%, compared to 0.4% previously
- Q2 GDP printed at 2.1% YoY, against 1.6% expected
- Retail sales for September increased by 0.9%, versus 0.3% expected
- Rising Q3 inflation data suggests that the RBA may increase rates.
Central banks at a Crossroads: RBA vs Fed
The robust data has heightened expectations that the RBA will raise rates by 25 bp to 4.35% in its next meeting. This potential RBA rate hike stands in contrast to the Fed, which is expected to maintain rates during Thursday's FOMC meeting and provide softer forward guidance, likely keeping rates on hold into year-end.
The China factor
This divergence in central bank expectations between the Fed and the RBA has been reinforced by news from China last week. Reports indicate that the NPC approved a mid-year expansion to its central budget for the first time since the Asian Financial Crisis in 1998.
AUD/USD technical analysis
The weekly candle that formed last week indicates a loss of momentum, suggesting that the AUD/USD is attempting to establish a base at last week's .6270 low.
AUD/USD weekly chart
However, as seen in the daily chart below, there is notable short-term resistance at .6400, stemming from recent highs, and more significant resistance at .6520/.6530 from highs in August and September. The AUD/USD needs to break above both these layers of resistance to confirm that a trend reversal is underway.
AUD/USD daily chart
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.
