Market Brief: AUD Lower On Dovish Westpac Call


A summary of news and snapshot of moves from today’s Asia session.

View our guide on how to interpret the FX Dashboard

FX Brief:

  • Continuing yesterday’s trend, it was mostly a quiet session for FX in Asia due to lack of economic data and general news flow. Until Westpac forecast RBA to cut 2x and begin QE by June 2020. This follows on from Dr Lowe’s speech yesterday where he effectively ruled out negative rates, yet left room for further cuts and the potential for QE (but not until rates hit 0.25%).
  • AUD was quick to react and shed 20 pips and is now the weakest major of the session, AUD/NZD touched a 3-month low AUD is the weakest major and USD is the strongest, volatility remain contained overall though with daily ranges around 20-50% of the ATR’s. AUD/USD is the biggest decliner, EUR/AUD is the leader of the back with NZD/JPY a close 2nd.
  • Positive comments from Trump on trade saw NZD/JPY touch is highest level since August 2nd, yet the small range with 70.27 resistance nearby makes it vulnerable to a dip lower.
  • Construction work done in Q3 beat expectations, by only contracting by -0.4% versus -1.0% expected. It’s a minor victory at best though, as the sector has contracted for the past 5 quarters.

Price Action:

    • DXY: This week has provided a spinning top Doji and bearish inside day on the daily charts below 98.45 resistance, which feeds into the potential for mean reversion from current levels. Still, with it being a quiet week data-wise, it could simply consolidate around current levels without a catalyst and we’d revisit the potential for a bullish break.
    • AUD/USD: The dovish forecasts from Westpac has seen sellers return so support around 0.6700 is back within focus. A clear downside break of this level brings 0.6750 and 0.6723 support into view for bears.
    • USD/JPY: Yesterday’s candle is reminiscent of a bearish hammer, although the body is wider than textbooks would like. Yet with it closing beneath 109.76 resistance, there’s still potential for a swing high to form. It all comes down to a trade deal – if markets believe one will materialise, expect USD/JPY to head for 109.47, whereas if it appears dead in the water (again), then we’ll get the bearish catalyst.

  • U.S. President Trump’s ‘final throes” remark on the completion of the U.S-China Phase One trade deal has muted effect on Asian stock markets even though U.S. major stock benchmark indices; S&P 500, Nasdaq 100 and Dow Jones Industrial have soared to hit another round of fresh all-time highs respectively.
  • Mix performances so far for key Asian stock indices with China A50 down by -0.15% and Singapore’s Straits Times Index and Hong Kong’s Hang Seng Index are almost unchanged. The top performer is from Australia’ ASX 200 that has rallied by close to 1.00% reinforced by RBA governor Lowe’s speech yesterday that quantitative easing monetary policies can still be implemented by RBA if “certain conditions” warrant.
  • The AXS 200 is now breaking above last week’s high of 6814, also a 3-month high led by the Telecommunications Services and Technology sectors that have gained by 2.53% and 1.16% respectively.
  • Overall, Asian stock markets need more clarity on the U.S-China trade deal and what is in store for “Phase Two” rather than just “optimism talking”. Also, on the signing off on the Hong Kong Human Rights and Democracy Act into legislation where U.S. President Trump has been “sitting on it”. Beijing has continued voiced displeasure and vowed to retaliate, thus may complicate the on-going trade deal negotiation talks. If Trump opts to do nothing, the bill will automatically become law on 03 Dec. If Trump veto it, the bill can still be overridden by two-thirds majorities in the House and Senate where most Democrat and Republican law makers support the bill overwhelmingly.
  • The S&P 500 E-Mini futures is trading almost unchanged in today’s Asian session with a tight range of 5 points.

Matt Simpson and Kelvin Wong both contributed to this article

Data from Refinitiv. Index names may not reflect tradable instruments and not all markets are available in all regions.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

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.

For further details see our full non-independent research disclaimer and quarterly summary.