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Australian Dollar Threatens Key Level as APAC Traders Eye Omicron News

Australian Dollar Threatens Key Level as APAC Traders Eye Omicron News

Thomas Westwater, Analyst

Australian Dollar, AUD/USD, Omicron Variant, Q3 Business Inventories - Talking Points

  • Emerging Covid variant likely to weigh on sentiment in APAC trading
  • Australia will report third-quarter business inventories, company profits
  • AUD/USD flirts with the August low following four weekly losses

Monday’s Asia-Pacific Forecast

The risk-sensitive Australian Dollar faces a tough week ahead against the US Dollar as global leaders move to cut off travel with South Africa following the discovery of a new Covid variant, dubbed “Omicron”. The new highly mutated strain of the virus sent US stocks crashing lower in Friday’s Wall Street session, with the Dow Jones Industrial Average (DJIA) closing 2.53% in the red.

Asian equity markets were already closed for the week when the World Health Organization (WHO) labeled the new strain as a “variant of concern,” the highest level used for emerging Covid threats. Stock indexes across the Asia Pacific region will likely price in the new worries today, which could send stocks deep into the red. Investors will be watching for any WHO updates as scientists race to assess the new strain’s potential threat.

Australia will report third-quarter business inventories along with company gross profits this morning. Analysts expect the data to cross the wires at 0.0% and 3.0%, respectively. That would be a decrease in both data sets compared to the second quarter, with lockdowns across New South Wales and Victoria likely being responsible for the weakness. Australia’s vaccination rate is nearing 90% for those over 16, which might make another round of lockdowns unlikely going forward.

Japan’s retail sales crossed the wires at 0.9% for October this morning, up from a revised -0.5% in September but below the 1.1% expected by analysts. Later today, Indonesia reports October motorbike sales, and the Philippines will see its retail price index for September cross the wires. Singapore is also set to release last month’s export and import price data.

AUD/USD Technical Forecast

AUD/USD is up against the August low (0.7106) after last week’s big 1.62% drop. That was the fourth consecutive weekly decline for the currency pair. Breaking below 0.7106 will have prices trading at levels not seen since November 2020. A recent bearish crossover between the 20- and 50-day Simple Moving Averages (SMA) puts a bearish outlook on near-term action.

The RSI and MACD oscillators are also tracking firmly lower. If bulls can defend the level and prices rebound, the September low will come into play as potential resistance. A break above that brings the 0.72 psychological level back into focus.

AUD/USD 8-Hour Chart

aud chart

Chart created with TradingView

--- Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwateron Twitter

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

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