This has been a volatile week, as fears over China's pandemic situation were followed by optimism for a softening in the strict zero-Covid policy, after the recent protests against the lockdown. Although there has not been any concrete change, its seems like there is a shift in tone.
The disruptions in economic activity were evident in today's data from the world's second largest economy, which revealed further contraction. The official Manufacturing PMI dropped to 48 in November, from 49.2 prior.
Meanwhile, investors brace for a slew of key economic data from the United States, including the PCE Inflation and the Jobs Report, as well as speech by Fed-Chair Powell. Markets have been contemplating a slower pace of rate hikes and will be now looking for more insights around the bank's intention.
The Reserve Bank of Australia (RBA) has already stepped back, with two straight small 25 basis points increases, following a series of bigger 0.5% moves. It still expects further tightening, and its governor has kept on the table, a return to higher increments . The RBA will be delivering its latest decision next week, on Tuesday.
AUD/USD failed once again above the 38.2% of the 2022 High/Low and opened lower on Monday, as the week started with risk aversion stemming from China – a key trading partner of Australia. The rejection exposes it to the EMA200 (0.6590-80) and daily closes below it would shift bias on the downside and put 0.6500 in danger, but a catalyst would be required for that.
The Aussie finds support since yesterday though and has not lost the initiative. As such, it has the ability push for fresh highs towards the DMA200 (mid-0.6800s), but will need help from the upcoming events to push beyond 0.6917.
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
Retrieved 27 Jan 2023 https://www.rba.gov.au/speeches/2022/sp-gov-2022-11-22.html