Daily brief: APAC markets eye RBNZ as AUD struggles despite a softer US dollar

Wednesday’s Asia-Pacific outlook

The Australian dollar failed to take advantage of a risk-on move that sent the US dollar lower against most of its major peers. Yesterday’s dovish 25-basis point rate hike from the Reserve Bank of Australia sent traders into Australian bonds, pushing yields lower.

That effectively makes the Aussie dollar less attractive to global market participants, and with the Federal Reserve and other central banks still primed to deliver jumbo rate hikes, the AUD/USD looks vulnerable despite an early-week bounce.

Speaking of central banks, the Reserve Bank of New Zealand (RBNZ) is scheduled to deliver an interest rate decision tonight. Rate traders see a strong possibility for a 50-bps rate hike. Despite front-loading much of its policy response, the New Zealand central bank remains in a hawkish position compared to the RBA and other central banks across the region, including the People’s Bank of China (PBOC).

Market sentiment looks steady following a bullish overnight session in New York where the Dow Jones Industrial Average, S&P 500 Index, and tech-heavy Nasdaq-100 Index rose 2.80%, 3.06% and 3.14%, respectively.

Energy stocks led the gains on a broad-based rally as crude oil prices surged higher. OPEC+ is reportedly mulling a production cut as high as 2 million barrels per day (bpd). Key oil spreads rose sharply, with the 3:2:1 crack spread hitting its highest mark since August.

South Korea’s inflation rate fell to 5.6% from a year before in September, missing the 5.7% consensus forecast. Today, Australia’s August retail sales are due for a final update, and the Reserve Bank of Australia’s chart pack will cross the wires at 00:30 UTC. The Philippines September inflation rate is seen rising to 6.7% from 6.3% in August.

Australian dollar technical outlook

AUD/USD is probing former channel support, with the level now appearing as likely resistance. Prices have treaded cautiously higher since setting the September low at 0.6359, leaving behind a set of Bullish Engulfing candlesticks. A break back into the channel would bring the 20-day Simple Moving Average (SMA) into focus. A positive signal from the Relative Strength Index (RSI) bodes well for bulls, with the oscillator bouncing from its center line on the 4-hour timeframe.

AUD/USD four-hour chart

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.