Chart of The Day AUDUSD
AUDUSD Potential Reversal Zone & Probable Price Path
AUD: RBA kept the Cash Rate Target and 3yr yield target unchanged at 0.10% as expected and also maintained the parameters of term funding, while it stated the Board is not expecting to raise the Cash Rate for at least 3 years and is prepared to do more if needed with the size of the bond purchase program to be kept under review. RBA commented that fiscal and monetary support will likely be required for some time and addressing high unemployment is a national priority with a further rise in unemployment rate still expected but added that employment growth was strong again in October. Furthermore, the RBA stated that Australia's economic recovery is underway and recent data was generally better than expected but the recovery is still expected to be uneven and drawn out, as well as dependent on significant policy support.
USD: Month-end rebalancing flows took the S&P 500 lower by 0.46%, albeit the tech-heavy Nasdaq fared better and VIX declined 1.3% to 20.57. This came after the Dow chalked up its best November performance in a presidential election year since 1928. UST bonds were little changed overnight with the 10-year yield holding around 0.84% despite month-end extensions. Eurodollar futures volumes surged after the news that the IBA is consulting on extending the retirement date for the 3-month LIBOR till mid2023. Ahead of Fed chair Powell’s testimony to Congress today and tomorrow, his pre-released remarks opined that “recent news on the vaccine front is very positive for the medium term”, but “for now, significant challenges and uncertainties remain”. Treasury Secretary Mnuchin also “strongly encourage Congress to use the $455b in unused funds from the Cares Act to pass an additional bill with bipartisan support.
Overnight DXY gave back some of yesterday’s gains as the improvement in risk appetite forced a pullback from the briefly reclaimed 92.00 level and with focus turning to the upcoming activity data from the US including ISM Manufacturing PMI, while the pre-release text for Fed Chair Powell’s testimony at the Senate Banking Committee didn’t provide much excitement as he reiterated that the outlook for the US economy is uncertain and will depend on the virus
From a technical and trading perspective, AUDUSD price has stalled at prior cycle highs above .7400, the potential near term double top thesis is encouraged with yesterday's key reversal pattern that flipped the daily near term volume weighted average price bearish, accompanied by momentum divergence. Overnight prices have consolidated with the lower half of yesterday's range as such bearish exposure should be rewarded on a breach of yesterday's lows initial targeting a symmetry swing objective at .7165, from this area bulls may pick up the ball again, however, if sufficient bids don't develop then bears can look for a test of ascending trendline support to .7130
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