AUDUSD reclaims all ground lost in September - What comes next?
Tony Sycamore October 8, 2021 6:08 AM
U.S. stock markets closed higher overnight after lawmakers reached an agreement to extend the debt ceiling until December.
The improvement in risk sentiment helping the AUDUSD to close higher at .7315 (+0.60%), recovering all ground lost during September after a series of headwinds hit, including;
- Iron ore falling over 20%
- Higher U.S. yields providing support for the U.S. dollar
- The fall of Evergrande
- APRA has begun to tighten lending requirements which in theory delays the need for the RBA to start raising rates.
- Production cuts in China to comply with energy intensity targets a significant drag on Chinese growth.
Possibly contributing to the AUDUSD’s outperformance, after 106 days in lockdown, restrictions begin to ease this weekend in NSW, and Sydney looks set to make the most of it.
Restaurants, bars, and shops re-open. School resumes the following week with all kids back to school by October 25th, and holidays are again on the agenda.
Further helping the AUDUSD, an assumption that Chinese steel mills will increase production as power caps are lifted and after the National Development and Reform Commission (NRDC) urged miners to secure long-term coal supplies to generate electricity.
Overnight the CEO of Brazilian iron ore miner Vale told an industry conference that the iron ore market was “relatively tight” and will be “more balanced” going forward.
Turning to the charts, the AUDUSD appears to have carved out a potential inverted head and shoulders bottom on the intraday charts, noteworthy as the market sits very short the AUDUSD.
Should the AUDUSD break/close above the .7320/40 resistance area after tonight’s non-farm payrolls data, I would expect to see a short-covering rally commence with scope towards .7500c.
Source Tradingview. The figures stated areas of October 8th, 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.