Forex world

November 22, 2022

AUD/USD stays firmer past 0.6600

- AUD/USD picks up bids towards intraday high during the first positive day in five.

- Easing of market’s fears despite China’s covid woes underpin the corrective bounce.

- RBA’s Lowe could recall sellers amid hopes of hearing dovish words.

- Fedspeak, risk catalysts are also important for near-term directions.

AUD/USD seems bracing for Reserve Bank of Australia (RBA) Governor Philip Lowe’s dovish words as it snaps four-day downtrend around 0.6625 heading into Tuesday’s European session.

In doing so, the Aussie pair also takes clues from the softer US Dollar while struggling to justify the Covid woes in Australia’s largest customer, namely China. Firmer prints of the weekly ANZ-Roy Morgan Consumer Confidence and hopes of better trade ties with China also seemed to have underpinned the AUD/USD pair’s latest rebound.

It’s worth ANZ-Roy Morgan consumer confidence rose 1% in the latest week, its second consecutive weekly rise, and is now slightly above the 4-week average, stated Reuters. On the other hand, the Financial Times (FT) mentioned, “The first bilateral meeting between the leaders of China and Australia since 2016 raised hopes that acrimonious tensions between the countries might be easing, leading to the eventual lifting of trade sanctions imposed by Beijing.”

On the same line were recently softer US data and comments from the United States Federal Reserve (Fed) policymakers. Federal Reserve Bank of Cleveland President Loretta Mester said in a CNBC interview, “I think we can slow down from 75 at the December meeting.” Previously, Atlanta Federal Reserve President Raphael Bostic also turned down the 75 bps move and challenged the DXY bulls. Additionally, downbeat prints of the Chicago Fed National Activity Index for October, to -0.05 compared to 0.17 prior, also weighed on the US Treasury yields. However, the previous week’s strong US Retail Sales and Producer Price Index (PPI) keeps traders on the edge.

Even so, lingering fears of strong covid lockdowns in China and the resulting strain on the global supply chain seem to challenge the AUD/USD pair buyers.

Additionally, hopes of hearing bearish comments from RBA Governor Lowe and expectations of higher Fed rates also question the Aussie pair’s latest upside.

Against this backdrop, the US Treasury yields retreat while the US stock future print mild gains but stocks in the Asia-Pacific region trade mixed.

Hence, AUD/USD buyers should wait for RBA’s Lowe to confirm the latest recovery. Until then, bears seem to hide behind the doors.

Technical analysis

AUD/USD sellers keep the reins unless crossing the upper line of a one-week-old bearish trend channel, around 0.6690 by the press time.


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