Australian Dollar, AUD/USD, Consumer Confidence, Chinese Economic Data – Talking Points
- Australian Dollar sinks as broader market sentiment sours
- Chinese data set to cross the wires, offering risk-event potential
- AUD/USD finds support at 20-day SMA after breaking lower
Wednesday’s Asia-Pacific Forecast
The risk-sensitive Australian Dollar dropped sharply versus the US Dollar overnight as US stocks turned lower. Wall Street indexes resumed weakness seen last week following an upbeat Monday trading session. The August consumer price index (CPI) came in under analysts’ expectations before the New York opening bell and sent traders into safe-haven Treasuries. The benchmark 10-year yield fell over 3%, while the Dow Jones Industrial Average shed 0.84%, closing at its lowest level since July 21.
Meanwhile, the US Dollar rallied into the US session’s close after the weaker-than-expected CPI print sent the Greenback tumbling lower. Rate traders may have overreacted to the print initially, assuming that it would cause a substantial shift to the Federal Reserve’s path forward. However, price action suggests that those assumptions may have been overestimated. Some believe the Fed may use this to push off its tapering plans, but the miss is likely not substantial enough to do so.
Today’s APAC session will provide several opportunities for event risks. Australia’s September Westpac consumer confidence index will cross the wires this morning. The extended lockdowns across New South Wales and Victoria states have seen the index fall notably from earlier this year. Consumer confidence dropped to 104.1 in August from 108.8 in July. AUD/USD prices have mirrored the drop in the data rather closely, highlighting the deteriorating sentiment within Australia.
China is set to report a batch of economic data prints that include house prices, fixed asset investment, industrial production, retail sales, and unemployment – all for August. July saw several economic indicators fall from the prior month, causing some to fear a growth slowdown in the world’s second-largest economy. The respective analysts’ forecasts show another month of slowing growth is expected. A miss on one or all of those data points may cause a bout of risk aversion.
AUD/USD Technical Forecast
AUD/USD dropped below its 38.2% Fibonacci retracement level from the August/September move after falling below the 50-day Simple Moving Average (SMA). Prices are now firmly lower from the September high (0.7478), but the rising 20-day SMA appears to be offering a layer of support. A break below that will put a descending trendline from July in focus. Bulls have a tougher path to the upside given the break below the aforementioned levels.
AUD/USD 8-Hour Chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwateron Twitter
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