Market Brief AUD Lower On Dovish Westpac Call

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FX Brief:

• Continuing yesterday’s trend, it was mostly a quiet session for FX in Asia due to lack of economic data and general news flow. Until Westpac forecast RBA to cut 2x and begin QE by June 2020. This follows on from Dr Lowe’s speech yesterday where he effectively ruled out negative rates, yet left room for further cuts and the potential for QE (but not until rates hit 0.25%).
• AUD was quick to react and shed 20 pips and is now the weakest major of the session, AUD/NZD touched a 3-month low AUD is the weakest major and USD is the strongest, volatility remain contained overall though with daily ranges around 20-50% of the ATR’s. AUD/USD is the biggest decliner, EUR/AUD is the leader of the back with NZD/JPY a close 2nd.
• Positive comments from Trump on trade saw NZD/JPY touch is highest level since August 2nd, yet the small range with 70.27 resistance nearby makes it vulnerable to a dip lower.
• Construction work done in Q3 beat expectations, by only contracting by -0.4% versus -1.0% expected. It’s a minor victory at best though, as the sector has contracted for the past 5 quarters.

Price Action:

• DXY: This week has provided a spinning top Doji and bearish inside day on the daily charts below 98.45 resistance, which feeds into the potential for mean reversion from current levels. Still, with it being a quiet week data-wise, it could simply consolidate around current levels without a catalyst and we’d revisit the potential for a bullish break.
• AUD/USD: The dovish forecasts from Westpac has seen sellers return so support around 0.6700 is back within focus. A clear downside break of this level brings 0.6750 and 0.6723 support into view for bears.
• USD/JPY: Yesterday’s candle is reminiscent of a bearish hammer, although the body is wider than textbooks would like. Yet with it closing beneath 109.76 resistance, there’s still potential for a swing high to form. It all comes down to a trade deal – if markets believe one will materialise, expect USD/JPY to head for 109.47, whereas if it appears dead in the water (again), then we’ll get the bearish catalyst.

• U.S. President Trump’s ‘final throes” remark on the completion of the U.S-China Phase One trade deal has muted effect on Asian stock markets even though U.S. major stock benchmark indices; S&P 500, Nasdaq 100 and Dow Jones Industrial have soared to hit another round of fresh all-time highs respectively.
• Mix performances so far for key Asian stock indices with China A50 down by -0.15% and Singapore’s Straits Times Index and Hong Kong’s Hang Seng Index are almost unchanged. The top performer is from Australia’ ASX 200 that has rallied by close to 1.00% reinforced by RBA governor Lowe’s speech yesterday that quantitative easing monetary policies can still be implemented by RBA if “certain conditions” warrant.
• The AXS 200 is now breaking above last week’s high of 6814, also a 3-month high led by the Telecommunications Services and Technology sectors that have gained by 2.53% and 1.16% respectively.
• Overall, Asian stock markets need more clarity on the U.S-China trade deal and what is in store for “Phase Two” rather than just “optimism talking”. Also, on the signing off on the Hong Kong Human Rights and Democracy Act into legislation where U.S. President Trump has been “sitting on it”. Beijing has continued voiced displeasure and vowed to retaliate, thus may complicate the on-going trade deal negotiation talks. If Trump opts to do nothing, the bill will automatically become law on 03 Dec. If Trump veto it, the bill can still be overridden by two-thirds majorities in the House and Senate where most Democrat and Republican law makers support the bill overwhelmingly.
• The S&P 500 E-Mini futures is trading almost unchanged in today’s Asian session with a tight range of 5 points.

Matt Simpson and Kelvin Wong both contributed to this article