AUD/USD and the ASX 200 bore the brunt of a risk-off week

Market summary

• Inverted yield curves, central bank hiking and weak PMIs data saw equity markets continue to sell off on Friday as investors became increasingly concerned with recessions and high levels of inflation
• China’s indices were the worst performers last week, with the Hang Seng down -5.7% and China A50 at -2.9% ahead of the 4-day weekend, Europe was also broadly lower with the DAX down -3.2%
• On Friday the S&P 500 fell to a 6-day low, the Dow Jones Industrial fell to an 11-day low, the DAX a 3-week low and the ASX200 a 2-week low
• Manufacturing PMIs across the eurozone, UK and the US also contracted at a faster pace whilst services PMIs expanded at a slower rate, weak demand saw Japan’s manufacturing PMI contract at 49.8
• A key measure of Japan’s inflation rose to a 42-year high, sparking some fresh speculation that the BOJ may be forced to tighten policy sooner than later
• Right on cue, Japan’s Finance Minister warned markets that they are ‘firmly’ watching FX moves after USD/JPY broketo its highest level since November(when US inflation came in much softer than expected)
• The US dollar was the strongest major and rose against all of its peers, whilst AUD/USD and NZD/USD were the weakest thanks to a risk-off end to the week
• EUR/USD suffered its worst day in five weeks on Friday and fell to 1.0850before pulling back to 1.0900
• Gold had its worst week in 20 and now trades around $1920 with $1900 a key area for bulls to defend this week
• WTI crude oil pilled back for a second day but managed to stay just above its June low before printing a small bullish pinbar, and close around the mid-point of its ~$6.50 - $7300 range

Events in focus (AEDT):

• 09:50 – BOJ summary of opinions, JP services price index
• 18:00 – German Ifo business sentiment

ASX 200 at a glance:

• Third consecutive day lower for the ASX 200 (second daily loss over 1%)
• It closed just below 7100, yet volumes were declining despite the large bearish bars
• This brings the potential for the move to lose some steam at the start of the weak (quiet economic calendar)
• Swing lows around 7078 area a key level for bulls to defend today

AUD/USD 1-hour chart:

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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