Australian Dollar: USD/AUD (AUD=X) investors will be interested in how the Fed views future rate hikes
The Australian and New Zealand Dollars finished lower last week on renewed concerns about China’s economy. For much of the week, investors were in consolidation mode as positive news emanated from the on-going trade talks between the United States and China. However, this came to an abrupt end when softer-than-expected economic data from China triggered a steep sell-off in the Aussie and Kiwi.
Last week, the AUD/USD settled at .7175, down 0.0024 or -0.34% and the NZD/USD finished at .6799, down 0.0061 or -0.88%.
Global equity markets traded higher early in the week on optimism that U.S. and China negotiations would soon resolve the trade dispute issues between the world’s two largest economies. Driving this train of thought was a pair of olive branches from China and upbeat comments from President Trump.
Firstly, China resumed buying U.S. soybeans as China’s President Xi made good on his recent pledge. Secondly, China said it would temporarily reduce tariffs on imports of American-made cars.
This optimism came crashing down on Friday following the release of disappointing data from China. The selling began in Asia early Friday after China reported industrial production and retail sales growth numbers for November which failed to meet expectations. The data served as the latest signs of a weakening economy in China. Furthermore, it exposed the risks that China is facing as it continues to battle the United States in their ongoing trade war.
This week, most eyes will be on the interest rate and monetary policy decisions by the U.S. Federal Reserve. The Fed is widely expected to raise its benchmark interest rate 25 basis points. However, investors will be more interested in how the Fed views future rate hikes.
Fed Chair Powell will also hold a press conference. He is expected to soften his tone about the economy, which will be interpreted as him being dovish. His job is to calm the markets enough to potentially jump start another leg up in the stock market.
If successful, Treasury yields may fall as well as the U.S. Dollar, giving the Aussie and Kiwi a lift. However, if Powell comes across as too dovish then he runs the risks of driving stocks sharply lower. This will send investors into the safe-haven U.S. Dollar, putting additional pressure on the Australian and New Zealand Dollars.
Domestically, New Zealand Dollar traders will get the opportunity to react to fresh quarterly GDP data. The report is expected to show the economy grew 0.6%, down from 1.0%.
Australian Dollar traders will be watching labor market data. The Employment Change report is expected to show the economy added 20K jobs in November. This will be down from 32.8K. The Unemployment Rate is expected to remain unchanged at 5.0%.
Overall, the bias in prices is: Sideways
The projected upper bound is: 0.73.
The projected lower bound is: 0.71.
The projected closing price is: 0.72.
During the past 10 bars, there have been 3 white candles and 6 black candles for a net of 3 black candles. During the past 50 bars, there have been 24 white candles and 25 black candles for a net of 1 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 42.0864. This is not an overbought or oversold reading. The last signal was a buy 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 43.11. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 158 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -94. This is not a topping or bottoming area. The last signal was a buy 4 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 7 period(s) ago.
Rex Takasugi – TD Profile
FOREX AUD= closed up 0.000 at 0.718. Volume was 23% below average (neutral) and Bollinger Bands were 16% narrower than normal.
Open High Low Close Volume___
0.718 0.719 0.716 0.718 87,689
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 0.72 0.72 0.74
Volatility: 7 10 10
Volume: 119,997 120,725 106,935
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX AUD= is currently 2.9% below its 200-period moving average and is in an downward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of AUD= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on AUD= and have had this outlook for the last 4 periods.