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Australian Dollar May Bounce as Risk Appetite Recovers

Australian Dollar May Bounce as Risk Appetite Recovers

Ilya Spivak,

Talking Points:

The New Zealand Dollar underperformed in overnight trade. The move tracked a drop in 3-month borrowing costs, hinting it may have reflected pre-positioning ahead of tomorrow’s RBNZ monetary policy announcement. Traders are pricing in a 64 percent probability of a 25 basis point rate cut, according to OIS-derived estimates.

The US Dollar likewise faced selling pressure as prices corrected after hitting a weekly high in yesterday’s session. The Euro and the Japanese Yen proved best-supported as risk aversion carried over from Wall Street onto Asian bourses, encouraging the unwinding of carry traders funded in the two low-yielding currencies.

Looking ahead, a quiet economic data docket in European and US hours seems likely to put sentiment trends at the forefront. S&P 500 futures are pointing firmly higher in late Asian trade, hinting a recovery in risk appetite may be afoot after the MSCI World Stock Index – a proxy for the daily ebb and flow of global investors’ confidence – dropped to a three-week low yesterday.

This may cap Euro and Yen gains while offering a lifeline to higher-yielding alternatives, such as the Australian Dollar. The currency completed its largest two-day loss in six weeks against its US counterpart at the close of yesterday’s session. We are looking to any bounce from here as a selling opportunity.

Losing Money Trading Forex? This Might Be Why.

Asia Session

23:30AUDWestpac Consumer Conf. Index (DEC)100.8-101.7
23:30AUDWestpac Consumer Conf. (MoM) (DEC)-0.8%-3.9%
23:50JPYMachine Orders (MoM) (OCT)10.7%-1.5%7.5%
23:50JPYMachine Orders (YoY) (OCT)10.3%0.6%-1.7%
23:50JPYMoney Stock M2 (YoY) (NOV)3.3%3.5%3.7%
23:50JPYMoney Stock M3 (YoY) (NOV)2.7%2.8%2.9%
00:30AUDHome Loans (MoM) (OCT)-0.5%-1.0%2.0%
00:30AUDInvestment Lending (OCT)-6.1%--8.2%
00:30AUDOwner-Occupier Loan Value (MoM) (OCT)0.4%-3.1%
01:30CNYCPI (YoY) (NOV)1.5%1.4%1.3%
01:30CNYPPI (YoY) (NOV)-5.9%-6.0%-5.9%
06:00JPYMachine Tool Orders (YoY) (NOV P) -17.9%--22.9%

European Session

06:45CHFUnemployment Rate (NOV)3.4%3.3%Medium
06:45CHFUnemployment Rate SA (NOV)3.4%3.4%Medium
07:00EURGerman Trade Balance (OCT)21.7B22.9BMedium
07:00EURGerman Current Account Balance (OCT)23.7B25.1BMedium
07:00EURGerman Exports SA (MoM) (OCT)-0.6%2.6%Low
07:00EURGerman Imports SA (MoM) (OCT)-1.0%3.6%Low
07:00EURGerman Labor Costs WDA (YoY) (3Q)-3.1%Low
07:00EURGerman Labor Costs SA (QoQ) (3Q)-0.9%Low
09:30GBPBOE FPC Nov. Meeting Minutes --Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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