Currency Pair of the Week AUDUSD
The first week of June brings a plethora of economic data which could affect the next long-term trend of AUD/USD. For Australia, the most notable event will be the RBA Interest Rate Decision. Although no change is expected, traders and investors will undoubtedly be watching the language in the statement. With Australia re-opening is economy, traders will be watching to see if the RBA strikes a “less dovish” tone, as RBA Governor Philip Lowe has indicated that negative rates are not on the table for now. In addition, Australia will release its Q1 GDP Growth Rate. Expectations are for -0.3% vs 0.5% last. Although Q1 ended over a month ago, traders will be watching to see how “bad” things actually got and look for clues as to what may lie ahead for Q2. In the US, the economic highlight will be Nonfarm Payroll data on Friday. Expectations are for a decrease on 8,000,000 jobs compared to an April figure of -20,500,000. Although expectations are for a significantly better print, -8,000,000 is still a terrifying figure.
In addition to the economic data this week, geo-political factors could play a role in the direction of AUD/USD. The most significant will be retaliation from China towards the US over possible sanctions due to China’s involvement in Hong Kong. In addition, the US is studying the differing practices of Chinese companies listed on US stock exchanges. This may prompt some Chinese firms to delist from US exchanges. We already saw some early signs of retaliation as China said it will halt some soy and pork imports from the US. This puts the trade agreement between the US and China into jeopardy. Why would US-China relationships affect AUD/USD? The reason is that Australia is dependent on China’s economy. Therefore, if there is a possibility a slowdown in China’s economy (as we saw with the coronavirus), it will directly affect Australia and the Australian Dollar.
AUD/USD is in breakout territory and appears on its way to retest the December 31st, 2019 highs. The pair has already taken out the 200-day moving average (which provided resistance last week) and the 78.6% Fibonacci retracement level from the December 31st highs to the March 19th lows. Since early March, AUD/USD has been highly correlated with the S&P 500, with a correlation coefficient of +.92. For reference, a correlation coefficient of +1.00 means that the 2 assets are perfectly correlation and move together 100% of the time. Therefore, traders need to keep an eye on the S&P 500, which could provide clues to a turn in AUD/USD. First level of resistance is at .6838. If price breaks through there, it could run up to the December 31st highs near .7040. Horizonal support comes across at the 200 Day Moving average and the bottom trendline of the channel the pair as been in since mid-March near .6654.
Source: Tradingview, Forex.com
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.
ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.
City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.
The information provided herein is intended for general circulation. 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 or particular needs before making a commitment to invest, 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.
The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.
The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
© City Index 2024