The Australian dollar was given every excuse to fall on Tuesday and didn’t.
A resilient performance all things considered, and perhaps assisted by month-end flows and a modest rally in US stocks overnight (the recovery in the Aussie started when US markets opened).
Or perhaps indicative of stretched US dollar positioning, says Elias Haddad, senior currency strategist at the Commonwealth Bank.
“USD edged a bit lower overnight despite better than expected US economic activity and constructive comments from FOMC voter Jerome Powell,” he said on Wednesday morning.
“This may be an indication the USD is technically overbought and vulnerable to a short-term period of consolidation before it can resume its fundamental uptrend.”
In a speech delivered overnight, Powell stated that “the case for an increase in the federal funds rate has clearly strengthened since our previous meeting earlier this month”.
Just in case there was any doubt that the Fed will hike rates in just two weeks time.
Despite all those factors, the Aussie managed to hang tough against the US dollar and yen, a Teflon-like performance if there ever was one.
- AUD/USD 0.7484 , 0.0005 , 0.07%
- AUD/JPY 84.1 , 0.40 , 0.48%
- AUD/CNH 5.1738 , -0.0059 , -0.11%
- AUD/EUR 0.7029 , -0.0016 , -0.23%
- AUD/GBP 0.5989 , -0.0034 , -0.56%
- AUD/NZD 1.0495 , -0.0075 , -0.71%
Looking ahead to Wednesday’s session, there’s a bit on the radar with major economic data from Australia and abroad along with OPEC’s highly-anticipated November meeting.
“AUD will be somewhat impacted today by Australia’s October building approvals and private sector credit,” says Haddad.
He expects private sector credit to increase at a monthly rate of 0.3% in October with building building approvals remaining unchanged after a large decline in September.
Later in the session, markets will also receive inflation figures from the Eurozone along with ADP private sector payrolls, core PCE inflation, personal income and expenditure figures from the US.
Then, at 2am in Sydney, OPEC is scheduled to hold a press conference following its latest gathering, an event that will likely generate significant levels of volatility in both crude and currency markets.
Crude prices have been falling in recent days as doubts over a proposed production cut from the cartel next year grew.
While this suggests that upside risks are prevalent, this is countered by the knowledge that speculative positioning is still long right now.
Either way, both only add to the likelihood of volatility later in the session, including in the Aussie.
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