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Dow Jones Price Gain to Fuel AUD/USD Reversal to Chart Trend Line?

Dow Jones Price Gain to Fuel AUD/USD Reversal to Chart Trend Line?

2018-10-16 23:00:00
Daniel Dubrovsky, Analyst
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Asia Pacific Market Open – Dow Jones Prices, AUD/USD, British Pound, Brexit, US Dollar

  • Anti-risk Japanese Yen and Swiss Franc underperformed as S&P 500 and Dow Jones rose
  • Wall Street was lifted by earnings reports from Goldman Sachs, Morgan Stanly and Netflix
  • AUD/USD getting ready for a reversal to the descending trend line from February next?

We recently released our 4Q forecasts for the British Pound in the DailyFX Trading Guides page

The anti-risk Japanese Yen and Swiss Franc were among the worst performing majors on Tuesday. These currencies were undermined amidst a broad improvement in market mood as equities traded higher in Asia, Europe and in America. The S&P 500 and Dow Jones rallied 2.15% and 2.17% respectively. If the pullback in the former is done for now, it falls short of the more aggressive decline seen in February below.

S&P 500 Daily Chart, Comparing 2018 Major Pullbacks

Dow Jones Price Gain to Fuel AUD/USD Reversal to Chart Trend Line?

The upbeat mood picked up pace during Wall Street trade as Goldman Sachs and Morgan Stanley, along with other US companies such as Netflix, beat earnings estimates for the third quarter. In addition, the markets may have pre-positioned themselves for tomorrow’s FOMC meeting minutes which could reignite hawkish policy bets. Those were somewhat diminished last week amidst the broad selloff in stocks.

The British Pound outperformed despite disappointing news from EU Chief Negotiator Michel Barnier. He said that more time is needed to find an agreement on Brexit. His announcement helped top Sterling, which gained earlier thanks to a component of UK wage data rising to its highest since January 2009. GBP was also helped by supportive commentary from German and Austrian officials ahead of Barnier’s speech.

Gains in Sterling during the first half of Tuesday’s session weighed against the US Dollar which also offered a lift to other relatively high-yielding currencies. Notably the New Zealand and Australian Dollars rose. However, gains in those were pared as the greenback bottomed ahead of Wall Street open and pared some of its losses.

Wednesday’s Asia Pacific trading session is notably lacking key economic event risk, placing risk trends as the dominant driver for markets. We may see local equities echoing gains from the US, further weighing against the anti-risk Yen. Looking ahead though, we have Australian employment and Chinese GDP data later this week, both of which we will be covering live and you may sign up for these events below.

Australian jobs report live webinar coverage (Begins 10/18 at 00:15 GMT)

Chinese GDP report live webinar coverage (Begins 10/19 at 01:45 GMT)

AUD/USD Technical Analysis

Zooming in on the AUD/USD 4-hour chart, we can see that the pair is attempting to break above a near-term descending range of resistance from late last month. However, prices appear to be stalling right on the December/May 2016 lows. Confirmation of more closes above resistance would expose the pair to eventually retesting the descending trend line from February. But 0.72283 must be breached first. Meanwhile, former resistance now support seems to be preventing a GBP/AUD reversal lower.

AUD/USD 4-Hour Chart

Dow Jones Price Gain to Fuel AUD/USD Reversal to Chart Trend Line?

What Else to Expect Ahead?

New Zealand Dollar Fundamental Outlook

US Trading Session

Dow Jones Price Gain to Fuel AUD/USD Reversal to Chart Trend Line?

Asia Pacific Trading Session

Dow Jones Price Gain to Fuel AUD/USD Reversal to Chart Trend Line?

** All times listed in GMT. See the full economic calendar here

FX Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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