Australian Dollar, AUD/USD, Crude Oil, FOMC, LME, China - Talking Points
- Asia-pacific markets may rise ahead of tonight’s FOMC event after US equities rebound
- Oil prices continue to fall as China demand fears drag on fundamental outlook
- AUD/USD trades around the 50-day Simple Moving Average amid weaker technicals
Wednesday’s Asia-Pacific Outlook
The Australian Dollar was little changed versus the US Dollar in overnight trading as markets prepare for tonight’s Federal Open Market Committee (FOMC) rate decision. Oil prices continued to decline following a wave of lockdowns across China due to Covid outbreaks. Saudi Arabia is reportedly in talks to price oil exports to China in the Yuan, dealing a potential blow to the petrodollar. Meanwhile, negotiations between the United States and Iran remain deadlocked, casting doubt over additional global supply increasing soon. Iron ore prices, more central to the Aussie Dollar’s fundamentals, moderated this morning around the 145 level following three consecutive days of decline.
The London Metal Exchange (LME) is set to resume nickel trading tonight in the Europe session after last week’s sudden trading halt caused by an over-exposed Chinese firm. Since then, the Chinese nickel producer has secured a financial backstop through a lending agreement. The opening hours of trading tonight may be highly volatile, and the possibility exists that trading may be halted again. Meanwhile, several Chinese nickel firms have sent letters to customers casting doubt over the ability to field new orders in the short term. The nickel supply chain may take weeks or even months to recover.
Australia’s Westpac leading index for February is set to cross the wires this morning, followed by Japanese trade data, also for February. Analysts expect Japan’s trade deficit to ease to -112.6 billion yen from -2.2 trillion yen on stronger exports. The Bank of Japan is set to report an interest rate decision later this week. Later today, China and Australia will report housing prices and sales data.
Chinese equity markets may see some bidding today after Tuesday’s strong economic data surprised investors. The People’s Bank of China (PBOC) also opted to hold steady on the medium-term lending rate. That also came as a surprise to analysts who saw the PBOC easing further to support economic growth. Chinese policymakers are still expected to ease policy further over the coming months, however. The Yuan rose versus the Greenback overnight. A group of European leaders is in Kyiv today to talk with Ukrainian President Zelensky amid ongoing Russian bombardments in and around the city.
AUD/USD Technical Forecast
AUD/USD is flirting with its 50-day Simple Moving Average (SMA) after piercing below the longer-term 100-day SMA earlier this week. MACD is nearing a crossover below its centerline following a cross below the signal line, both bearish signals. A further drop in prices would see bears test the 61.8% Fibonacci and a descending trendline from October 2021. Alternatively, bulls would aim to retake the 100-day SMA if prices rebound.
AUD/USD Daily Chart
Chart created with TradingView
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--- Written by Thomas Westwater, Analyst for DailyFX.com
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