Australian Dollar Outlook Bleak into Asia as Markets Struggle to Shake off Volatility
Australian Dollar, AUD/USD, Ukraine, Volatility, Fed – Asia Pacific Market Open
- Australian Dollar trims most gains as volatility wrecked Wall Street again
- Ukraine geopolitical tensions, Fed monetary policy tightening key factors
- Asia-Pacific markets may extend sour lead, AUD/USD facing shooting star
Wednesday’s Market Recap – Australian Dollar, Wall Street, Ukraine, Fed Rate Hike Bets
The sentiment-linked Australian Dollar managed to hold a gain against the haven-oriented US Dollar despite ongoing volatility in global stock markets on Wednesday. However, it evaporated most of its gains. During the Wall Street session, Dow Jones, S&P 500 and Nasdaq 100 futures descended 1.37%, 1.81% and 2.56% respectively. The latter is now shaping up for the worst month since 2008.
It seemed that carry trade dynamics may have played a role in keeping the Aussie Dollar intact, as well as the New Zealand Dollar. The latter was aided by a hawkish Reserve Bank of New Zealand rate hike during the Asia-Pacific trading session. During the European session is when AUD and NZD took off as funding currencies, such as the Japanese Yen, weakened.
This reversed course on Wall Street, where a combination of Ukraine geopolitical tensions and monetary policy likely dampened risk appetite. The United States expanded sanctions against Russia, targeting builders of the Nord Stream 2 pipeline. This is as Ukraine reported that several government and bank websites came under a cyberattack, according to Bloomberg.
Meanwhile, US Treasury yields rallied across the curve, signaling that tighter monetary policy expectations are still front and center for markets. Looking at Fed Funds Futures, odds of 6 rate hikes this year increased. San Francisco Fed President Mary Daly noted that it is ‘too early’ to call an endpoint for hikes in 2022.
Thursday’s Asia Pacific Trading Session – Market Volatility
With that in mind, Asia-Pacific markets may follow the sour tone set on Wall Street. After the closing bell, US e-commerce company eBay Inc. reported earnings data that disappointed expectations. The company hinted that first-quarter sales will miss expectations. Sales were projected at US$ 2.43b – 2.48b. Analysts were looking for 2.6b. The stocks I down about 7.8% in after-hours trade.
This is as Bloomberg reported that Kremlin Press Secretary Dmitry Peskov said that leaders of the separatist regions in eastern Ukraine asked Russian President Vladimir Putin for aid in repelling Ukrainian armed forces. Heightened volatility risk may continue pressuring the Australian and New Zealand Dollars lower, with JPY and USD perhaps positioned to stand their ground.
Australian Dollar Technical Analysis
The Australian Dollar left behind a Shooting Star candlestick pattern on Wednesday, a sign of indecision. This is as AUD/USD continues to trade within the boundaries of a bearish Rising Wedge chart formation. A breakout under the wedge could hint at downtrend resumption. This is as the 100-day Simple Moving Average is holding as immediate resistance.
AUD/USD Daily Chart
--- Written by Daniel Dubrovsky, Strategist 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.