Australian Dollar, AUD/USD, Covid, US Dollar, Treasuries, Commodities – Talking Points
- Australian Dollar lower on virus cases despite jobs report beat
- US Dollar rises on safe-haven flows, Fed tightening outlook
- AUD/USD drops below 200-week Simple Moving Average
Friday’s Asia-Pacific Outlook
The Australian Dollar weakened overnight against the US Dollar, extending earlier losses. Traders priced in a worsening economic outlook. Australia reported a record one-day rise in Covid infections on Thursday, with New South Wales (NSW) driving a majority of them. The possibility of a double-dip recession is now on the table if current lockdowns extend into the fourth quarter of this year.
AUD/USD dropped on those concerns despite a better-than-expected jobs report. According to a Bloomberg survey, employment rose by 2.2k versus an expected -43.1k. However, the Australian Bureau of Statistics (ABS) data showed the toxic effects of lockdowns. The participation rate fell, undermining seemingly positive drop in the unemployment rate. A drop in participation within a labor market means more people have stopped looking for work.
Elsewhere, stocks were mixed on Wall Street. The Dow Jones Industrial Average (DJIA) closed 0.19% lower, while tech stocks broke a two-day losing streak. Bond traders bought up Treasuries, and the US Dollar added to its recent winning streak. The US Dollar DXY index broke into a fresh yearly high, which pressured gold prices, along with the broader commodity space. The economic docket to close the week out is rather sparse, with inflation data out of Japan being the only potentially high-impact price driver.
Overall sentiment across markets appears to be deteriorating rather quickly. While equity prices have held up, currencies and commodities suggest traders are bracing for a growth slowdown. That, along with tighter monetary policy on the horizon, may likely see volatile reactions to downside economic prints in the near term.
AUD/USD Technical Outlook:
AUD/USD dropped over 1% overnight, slicing through the high-profile 200-week Simple Moving Average (SMA). The currency pair hasn’t traded under the key moving average since November 2020, highlighting the bearish position after dropping more than 10% from its yearly high back in February.
Prices may find support at the current price level, which aligns with an area of congestion from late 2020 trading. A drop lower, however, may see an extension all the day down to an area of resistance turned support near the psychologically imposing 0.7000 level.
AUD/USD Daily Chart
Chart created with TradingView
Australian Dollar TRADING RESOURCES
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwateron Twitter
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