AUD/USD defies bears a breakout once again: Asian Open – 27/10/2023

Market Summary:

• The US economy grew much faster than expected in the third quarter with consumer spending doing much of the heavy lifting. Spending rose 4% q/q to lift GDP to 4.9%, compared with 4.3% expected and 2.1% prior.
• The US dollar rose to a 14-day high, although failed to hold on to gain to close effectively flat with a small shooting star candle
• The Euro also softened as the ECB delivered a dovish pause after 10 consecutive hikes, although the meeting left little room for any surprises
• Wall Street indices continued to slide in Thursday and reach their lowest levels since May following more disappointing earnings from mega cap stocks.
• The S&P 500 is on the bring of a technical ‘correction’, as it has nearly fallen 10% from its highest close to current close. If anything, these arbitrary umbers to define such moves could provide a level of support – as I have noticed a tendency for markets to rally when it hits the -20% technical ‘bear market’.
• Although that hasn’t exactly worked for the Nasdaq 100 which entered a technical correction on Thursday, now down -10.9% from its July high. But with us heading into the weekend, I am wondering if the selling recedes as bears book profits.
• Price action on oil remains choppy with WTI crude reversing all of Wednesday’s gains before once again finding support around the April high, on easing concerns over the Middle East conflict
• Gold continues to remain supported on safe-haven flows and saw its highest close since May. However, it remains in a choppy phase between the key levels of 1950 to 2000, so a tricky one to trade on the daily timeframe and likely best left for intraday setups
• USD/JPY has remained above 150 yet without any signs of intervention from the BOJ. Yet volatility is high and its intended direction remains unclear.
• RBA governor Bullock lowered expectations of an RBA hike from 65% to 47% during her speech on Thursday, where she said the central bank has not yet decided on its decision and is still assessing whether this week’s inflation figures deviate too far away from their own forecasts

Events in focus (AEDT):

• 10:30 – Tokyo CPI
• 11:30 – Australian PPI
• 12:30 – Chinese industrial production
• 23:30 – US PCE inflation
• 01:15 – Lagarde speaks

ASX 200 at a glance:

• The ASX 200 fell to a fresh YTD low on Thursday as it got caught up in the negative sentiment in yesterday’s APAC session (US futures were also falling after the cash market close)
• However, SPI 200 futures were little changed overnight so the cash market is not expected to track Wall Street lower and gap down
• Whether it can recover into the weekend is once again down to sentiment in Asia
• But if yesterday is anything to go by, we could see Asian equities move back into the red today and follow Wall Street’s lead
• With no obvious swing lows to refer to, 7050 and 7000 are potential support levels

AUD/USD technical analysis (daily chart):

Once again AUD/USD refuses to simply roll over and die, reminding us again why it is called ‘the battler’. Whilst we saw AUD fall to a fresh YTD low, it perfectly respected the November low and saw a daily close just above 63c. Given the lower daily wick, I’d prefer to seek dips towards the 63c area for a cheeky long and seek to exit somewhere around 0.6350.

As this is counter to the trend, I’m not looking for any extended rallies here – but give its reluctance to roll over, the path of least resistance may be higher for a few cheeky pips. There is no glamour in trading like this, but support is supporting.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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