AUD/USD and NZD/USD Rates Soar on the Fed, Powell to Resistance

Asia Pacific Market Open Talking Points

• Australian and New Zealand Dollars soar with S&P 500 on the Fed
• US Dollar declines across the board, EUR/USD clears key trend line
• AUD/USD, NZD/USD eyeing critical resistance ahead of event risk

AUD/USD, NZD/USD Soar on Fed and Chair Powell Press Conference

The sentiment-linked Australian Dollar and New Zealand Dollar soared against the Greenback on Thursday. All eyes were on the last Federal Reserve monetary policy announcement of this year, with markets pricing in a scenario for one 25bp reduction in 2020. Gauging the market reaction, the central bank appeared to not disappoint. This is despite the dot plot signaling rates being left unchanged next year.

At his press conference, Chair Jerome Powell highlighted that the central bank would like to see “a significant move-up in inflation” before considering support for rate hikes. This helped to drive dovish expectations for the medium-term as local government bond yields declined across the board. Wall Street also cheered the Fed as the S&P 500 and Dow Jones rallied 0.29 and 0.11 percent respectively by the close.

The anti-risk Japanese Yen also underperformed as the upbeat mood in investors likely fueled carry trade. Anti-fiat gold prices rallied at the expense of the Greenback and bond yields. This is as the US Dollar weakened against the Euro, with EUR/USD closing above a key descending trend line from June. The British Pound also recovered from yesterday’s YouGov poll.

Thursday’s Asia Pacific Trading Session

There may be some room to be had for Asia Pacific benchmark stock indexes to follow Wall Street higher today. That may continue driving selling pressure in JPY as AUD/USD and NZD/USD rally. There still remain plenty of critical event risk this week, limiting the scope for follow-through with volatility looming. These include the ECB rate decision, the UK General Election and the December 15 US-China tariff deadline.

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Australian Dollar Technical Analysis

AUD/USD now sits squarely on the defining descending trend line from the end of last year. Prices were unable to breach this psychological boundary. A daily close above resistance ought to require confirmation to signal a reversal of trend. This is especially with the October highs lurking just above (0.6894 – 0.6929). A turn lower would place the focus on near-term support at 0.6800 and 0.6754.

Charts of the Day – AUD/USD

Chart Created Using TradingView

New Zealand Dollar Technical Analysis

This is as NZD/USD approaches what could be a potential falling trend line from March – red-dashed line on the chart below. Prices have maintained upside momentum after the breach above an Ascending Triangle bullish chart pattern. A turn lower from here places the focus on the ceiling of the triangle at 0.6465. A daily close above the trend line may pave the way for a test of the next psychological barrier (0.6663 – 0.6682).

Charts of the Day – NZD/USD

Chart Created Using TradingView

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

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