Australian Dollar, AUD/USD, Covid, Westpac Consumer Confidence – Talking Points
- Asia Pacific trading may see a slight risk-on tone after Wall Street rises
- Australia’s Westpac Consumer Confidence report drops 4.5% for January
- AUD/USD moving higher on USD weakness, Symmetrical Triangle taking shape
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The Nasdaq Composite led the charge higher on Tuesday with a 1.53% gain, as Wall Street resumed trading after the extended holiday weekend. All major US indexes closed in the green, with the S&P 500, Dow Jones Industrial Average, and Russell 2000 rising by 0.81%, 0.38%, and 1.32%, respectively. The risk-on session was prompted by strong earnings results, stimulus hopes, and vaccination distribution efforts. Gold moved above the 1840 handle, bolstered by a weak US Dollar.
Markets digested commentary from Treasury Secretary nominee Janet Yellen in her confirmation hearing before the Senate Finance Committee. The former Federal Reserve Chair stressed the need for further stimulus to support the economy amid the ongoing Covid-19 pandemic. Ms. Yellen said, “the smartest thing we can do is act big,” citing historically low-interest rates, but also acknowledging the rising US debt burden.
The need for additional fiscal stimulus comes at a critical time for the United States, with US Covid deaths rising above 4000,000 on Tuesday, according to Johns Hopkins University data. Despite the death toll – which has now surpassed many initial estimates – markets appear more focused on the Post-Covid recovery and the incoming Biden administration’s aggressive vaccine distribution goal of inoculating 100 million people within 100 days.
Nasdaq-100 Index, US Dollar, Gold – 30 Min Chart
Chart created with TradingView
Wednesday’s Asia-Pacific Outlook
Asia-Pacific markets look ready to extend Monday’s price action after a mixed trading session that saw Hong Kong’s Hang Seng index hit fresh multi-month highs. China’s Shanghai Composite declined by 0.83%, however. China is facing its most severe Covid outbreak since the initial outbreak back in March, with officials confirming over 100 new cases for Tuesday.
The Australian Dollar is ticking higher against the broadly weaker US Dollar, with AUD/USD overtaking the 0.77 handle after dropping near its January low earlier this week. The Westpac Consumer Confidence report crossed the wires early Wednesday at 10.7.0 for January, a 4.5% drop from the prior month. While Australian consumers remain generally upbeat – indicated by a reading over 100 in the index – recent Covid clusters, border closures, and foreign Covid outbreaks weighed on sentiment, according to the report.
Australia Westpac Consumer Confidence
Despite the month-over-month drop in consumer sentiment, the Aussie-dollar was unencumbered as the report crossed the wires. Still, the drop in sentiment is concerning with regard to the larger economic recovery. The Westpac report noted a drop in the 12-month economic outlook, falling 8.3%. The survey’s Unemployment Expectations Index also reflected a worsening outlook, with an 11.9% increase, which translates to a weaker consumer view for Australia’s labor market.
Australian Dollar Technical Outlook:
AUD/USD’s recent swing low has opened the door to a possible Symmetrical Triangle forming; the consolidation pattern requires one more reactionary low to confirm the pattern, but it is a notable development nonetheless that warrants attention, nonetheless. For now, momentum appears to be picking up for a further push higher, with the MACD line completing a bullish cross above its signal line on the four-hour timeframe.
The 20-day Simple Moving Average serves as the most immediate area of support as prices gyrate near the SMA. A continuation higher will bring the aforementioned triangle pattern’s upper bound into play, possibly a point of resistance. To the downside, the triangle’s support line may hold and signal technical confirmation of the pattern if it does. Below that and the 23.6% Fibonacci retracement from the Nov-Jan move opens up as possible support.
AUD/USD 4-Hour Chart
Chart created with TradingView
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— Written by Thomas Westwater, Analyst for DailyFX.com
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