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Australiandollar

Today’s Notable Sentiment ShiftsUSD – The dollar fell for a second straight session on Tuesday, after hitting a 18-month peak at the end of last week, on weak PMI data and after Fed members pushed back against aggressive rate hikes this year. ISM Manufacturing PMI fell to a 14-month low in January, dropping to a reading of 57.6 from 58.8 in December. Amongst the chorus of Fed speakers on Tuesday was Fed’s Daly, who stated that the Fed is poised for a March rate hike, but after that, she wants to “see what the data brings” and “get through omicron”. A similar tone was echoed by Fed’s Bostic, who said that “we are going to need to be thinking very carefully about how things are going, how the economy responds to our first moves… We are not set on any particular trajectory. The data will tell us what is happening.” AUD – The Australian dollar initially sold off on Tuesday after the RBA fell short of hawkish expectations at their February policy meeting. However, its weakness was eventually pared, with market participants seemingly undeterred by Governor Lowe’s comments. Summarising the meeting and Australia’s monetary policy outlook, Westpac stated that “it was a clearly dovish message. The Governor has certainly gone out of his way to dissuade pricing for a hike in the first half of the year.” But continues to believe that their “August meeting expectation appears well placed… So while yields at the front end and out to 3-years will be lower, they will only be marginally so and we remain better sellers into strength, despite the RBA message.”
TVC:DXY
by thunderpips
2
AUD USD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy In Dec the RBA kept rates at 0.10% and weekly bond purchases at A$4bln until mid-Feb, as expected. They reiterated their commitment to maintain highly supportive monetary conditions and won’t raise rates until actual inflation is sustainably within their 2%-3% target range. They noted that the economy is recovering from the Delta slowdown and is expected to return to pre-Delta path in 1H22. The positive take from the meeting was that the RBA did not think Omicron will derail the expected recovery and sounded more optimistic than markets anticipated. They also said they will consider the future of their QE program at the Feb meeting and outlined their criteria for that which includes actions of other central banks, bond market functioning and actual and expected progress towards the goals of full employment and inflation consistent with their target. All in all, the bank still had a dovish stance but was more optimistic about the economy than expected. Furthermore, out of the 3 criteria set by the bank, it seems like all three have now been met following the past week’s CPI print. 2. Idiosyncratic Drivers & Intermarket Analysis There are 4 key drivers we’re watching for Australia’s med-term outlook: The virus situation – so far, the RBA has been positive about a post-Delta recovery, but incoming employment and inflation data will be crucial to see whether that optimism is justified. China – Even though the PBoC has finally stepped up with new stimulus & some fiscal support is expected in 1H22, the Covid-Zero policy in China does pose a risk to their expected 2022 recovery so the recent rapid rise in cases is one to watch. Politically, the AUKUS defence pact could see possible retaliation from China against Australian goods and is always something to keep on the radar. Commodities – Iron Ore, (24% of exports) and Coal prices (18% of exports) are important for terms of trade, and with both pushing higher on PBoC easing, that is a positive for the AUD as long as they maintain their recent push higher. Global growth – as a risk proxy, the global economy is an important consideration for AUD, which means the expected slowdown in growth and inflation globally is an important point to consider, but if China can put in a solid year that should limit the fall out of a faster slowdown in the global economy. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Latest CFTC data showed positioning change of +5181 with a net non-commercial position of -83273. As outsized net-shorts are usually seen as a contrarian indicator we want to be mindful of potential short squeezes, which also means the AUD can be more sensitive to positive data or developments compared to negative ones as a lot of the bad news has been priced. The recent wobble in equities have kept the AUD pressured, but it was encouraging to see that despite the equity downside the AUD managed to see some minor short unwinding. 5. The Week Ahead Biggest focus in the week ahead is on Tuesday’s RBA meeting. Consensus believes that the three criteria the bank insisted on at their Dec meeting has been met, and thus believes the bank to announce an end of their QE program. However, it’s interesting to note this view isn’t shared by all, and some investment bank research suggests that the bank could simply opt to taper current purchases down to A$4 billion to A$2 billion, which would be seen as a dovish tilt from the bank and would disappoint current expectations. With inflation printing well above the bank’s 2-3% target band on the headline and Unemployment reaching 4.2% it seems that the bank is running out of excuses to keep up the overly dovish stance. However, as wage growth is always a major focus point for the bank, there is some credence to those who take a more sober approach to this upcoming meeting as we will only see 4Q21 wage data on the 23rd of Feb, which could give the bank an ‘excuse’ to simply taper purchases by half and explain they will review again in May. A decision to taper instead of end QE could certainly add additional weakness to the AUD, but we would think such weakness to be more limited given positioning, while an end to QE could see some further unwind of stretched net-shorts. USD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy The Jan FOMC decision was hawkish on multiple fronts. The statement signalled a March hike as expected, but the press conference from Chair Powell portrayed a very hawkish message. Even though Powell said they can’t predict the rate path with certainty, he stressed the economy is in much better shape compared to the 2015 cycle and that will have implications for the pace of hikes. Furthermore, the Chair explained that there is ‘quite a bit of room’ to raise rates without dampening employment, which suggests upside risks to the rate path, especially coming from Powell. A big question markets wanted an answer for was whether the Fed was concerned about recent equity market volatility . However, the Chair explained that markets and financial conditions are reflecting policy in advance and stressed that in aggregate their measures they look at is not showing red lights. This was a clear message to markets that any ‘Fed Put’ is much further away and that inflation is the biggest focus point for the Fed right now. The Chair also didn’t rule out the possibility of hiking 50bsp in March or possibly hiking at every meeting this year, which was seen as hawkish as it means the Fed is looking for optionality to move more aggressive if they need to. On the balance sheet , we didn’t really get new info and the Chair reiterated that they are contemplating a start of QT after the hiking cycle has begun but also reiterated that they will discuss this in coming meetings. Overall, the tone and language used by the Chair were a lot more hawkish than the Dec meeting and more hawkish than some were hoping for. 2. Global & Domestic Economy As the reserve currency, the USD’s usage around the world means it usually has an inverse correlation to the health of the global economy and global trade. The USD usually gains strength when growth & inflation both slow (disinflation) and loses ground when growth & inflation accelerates (reflation). Thus, with expectations that both growth and inflation will decelerate this year, both in the US and the globe, that should be a positive input for the USD in the med-term . However, incoming data will also be important in relation to the ‘Fed Put’. There are many similarities between now and 4Q18, where the Fed were also tightening aggressively going into an economic slowdown. So, incoming data will be crucial to watch. As long as growth data slows and the Fed stays aggressive that would be a positive environment for the USD, but if it causes the Fed to pivot more dovish and causes a rate repricing in money markets it would be seen as a negative input for the USD. 3. CFTC Analysis Latest CFTC data showed a positioning change of +427 with a net non-commercial position of +36861. The shortterm unwinding of stretched USD longs played out as expected at the start of the year but was also short-lived in the midst of the recent strong risk off sentiment in certain parts of the market and of course the continued hawkish stance from the Fed. 4. The Week Ahead In the week ahead the party starts all over again with a new month which means we’ll get new ISM PMI releases as well as the Jan NFP report. It’s important to keep the current economic climate in mind when looking at possible reaction functions for the USD. Usually, positive data should be USD positive and negative data USD negative when the Fed is busy with a hiking cycle, but right now there are growing fears that economic data has been slowing much faster than expected and means the Fed could be on its way to make the same mistake it did back in the end of 2018. As long as those fears persist, we might see the USD having two different reaction functions to growth and inflation data. Reacting inverse to growth data but acting correlated to inflation data. That makes this week’s incoming ISM data very interesting as the Dec data decelerated much faster than expected on the growth side, and a further miss might spark more fears about a faster slowdown. The tricky part for the USD in the week ahead is that both the ISM prints as well as the NFP report has inflation components with the ISM priced paid components and the Average Hourly Earnings on the NFP side. If growth data slows very fast that could be USD positive, but if inflation data starts decelerating much faster that could also be USD negative as it means less need for aggressive Fed policy. A tricky one for the week ahead.
by thunderpips
2
AUDUSD, Completed Bear-Flag, Further Continuations!Hello, Welcome to this analysis about AUDUSD on the 2-day timeframe perspectives. As when looking at my chart we can watch there how AUDUSD is in a crucial condition with this major wave count emerged with the initial bearish wave A to the downside from where AUDUSD continued to form the next wave B which has taken the shape of a bear flag formation and in this bear flag together with the major wave B AUDUSD also formed a coherent local wave count from A to C in the bear flag. The fact that AUDUSD already pulled back highly bearishly below the lower boundary of this whole bear flag formation in a high volatile manner shows that AUDUSD has a high likelihood to continue with the movements and the development of the wave C in this whole structure. Also as AUDUSD recently completed the bear flag AUDUSD activated lower target zones marked in my chart in the black box, once these targets have been reached the situation needs to be elevated again and AUDUSD needs to show if it reverses in this zone or just sets up for the next bearish continuations, it will be an interesting development ahead. In this manner, thank you for watching the analysis, all the best! "There are many roads to prosperity, but one must be taken." Information provided is only educational and should not be used to take action in the markets.
by VincePrince
8
AUDUSD - Short Idea The fundamental Bias of this pair is bearish. Most analysts and financial institutions predict a downtrend. The AUDUSD trend is bearish. In terms of CFTC data, there are more sell positions on this Retailers are also buying these assets, which gives our downtrend a better chance. Technically, the bullish channel is broken and with the pullback to the same channel, the risk position can be received to the appropriate reverb. Set your SL: 71.908 Set your TP: 71.00
Short
by Alisabbaghi
1
AUDNZD 2022-Jan-23 Trade Idea (No Indicators)AUDNZD Trade Setup Idea Analysis Using Only Trend, Horizontal Support Level, and Horizontal Fibonacci Retracement Support Level. First, identify the direction of the trend. Second, draw horizontal support level across the highs. Third, drag Fibonacci Retracement Tool from previous higher low to higher high. Next, wait for price to retrace to the level where 50% Fibonacci Retracement Level overlaps with Horizontal Support Level. Enter using a buy limit. Enter another order after a bull candle forms on the level.
Long
by TradeLive-
AUD USD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy In Dec the RBA kept rates at 0.10% and weekly bond purchases at A$4bln until mid-Feb, as expected. They reiterated their commitment to maintain highly supportive monetary conditions and won’t raise rates until actual inflation is sustainably within their 2%-3% target range. They noted that the economy is recovering from the Delta slowdown and is expected to return to pre-Delta path in 1H22. The positive take from the meeting was that the RBA did not think Omicron will derail the expected recovery and sounded more optimistic than markets anticipated. They also said they will consider the future of their QE program at the Feb meeting and outlined their criteria for that which includes actions of other central banks, bond market functioning and actual and expected progress towards the goals of full employment and inflation consistent with their target. All in all, the bank still had a dovish stance but was more optimistic about the economy than expected. Furthermore, out of the 3 criteria set by the bank, the first two is arguably a green light already, which means the only thing we are waiting for after last week’s solid jobs print is this week’s incoming QQ CPI print. 2. Idiosyncratic Drivers & Intermarket Analysis There are 4 key drivers we’re watching for Australia’s med-term outlook: The virus situation – so far, the RBA has been positive about a post-Delta recovery, but incoming employment and inflation data will be crucial to see whether that optimism is justified. China – Even though the PBoC has finally stepped up with new stimulus & some fiscal support is expected in 1H22, the Covid-Zero policy in China does pose a risk to their expected 2022 recovery so the recent rapid rise in cases is one to watch. Politically, the AUKUS defence pact could see possible retaliation from China against Australian goods and is always something to keep on the radar. Commodities – Iron Ore, (24% of exports) and Coal prices (18% of exports) are important for terms of trade, and with both pushing higher on PBoC easing, that is a positive for the AUD as long as they maintain their recent push higher. Global growth – as a risk proxy, the global economy is an important consideration for AUD, which means the expected slowdown in growth and inflation globally is an important point to consider, but if China can put in a solid year that should limit the fall out of a faster slowdown in the global economy. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Latest CFTC data showed positioning change of +3032 with a net non-commercial position of -88454. As outsized net-shorts are usually seen as a contrarian indicator we want to be mindful of potential squeezes higher for the AUD, which also means that the AUD is most likely going to be more sensitive to positive data or developments compared to negative ones because a lot of the bad news has been priced in. The recent downside in equities have kept the AUD pressured, but it was encouraging to see that despite the downside that the AUD managed to see some minor unwinding of net-shorts, and as the most recent CFTC update did not include Thursday’s reaction to the good jobs report, we would expect to see more unwind with next week’s data. 5. The Week Ahead The most important data point for the AUD in the week ahead is the upcoming quarterly CPI data scheduled for Tuesday. Recall that the RBA gave us three criteria they will be watching to determine the future of their asset purchase program, and with 2 of those 3 criteria arguable already confirmed, the only thing left is the economic data. After the solid jobs data last week, CPI is the final piece to the puzzle, and if we can see a solid print, it should see consensus pricing in an end to the QE program at next week’s meeting. Consensus sees the YY measure climbing to 3.2% and QQ climbing to 1.0% (unchanged expected for Trim & Weighted). According to Westpac there is downside risks from household goods and furnishings while there are upside risks from dwelling prices. Apart from CPI, as a high beta the overall risk sentiment after last week’s equity bloodbath will also be an important focus point for the AUD in the week ahead. USD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy The Fed turned a lot more hawkish than expected in Dec. They doubled the pace of tapering to $30 billion per month which will see QE concluded by March 2022 as was widely expected. Surprisingly though the Summary of Econ Projections showed the median dot plot pencilled in 3 hikes for 2022 (up from the previous 1), confirming Fed Fund Future expectations. Fed Chair Powell explained they hadn’t decided whether to pause between the end of tapering and a first hike but reiterated that rates will likely only rise when QE has concluded. Another positive shift was Powell’s comments that they could raise rates before full employment has been met due to high inflation , and stated that with inflation above target, they cannot wait too long to get to maximum employment as current inflation levels is seen as a threat to max employment. The hawkish tilt went further to note that the bank started discussing the balance sheet but said no decisions were made on when QT might commence. Even though the dots projected 3 hikes for 2022, the updated rate trajectory only showed 1 additional hike over the forecast horizon, which combined with a lower terminal rate was less hawkish than some had feared. Nonetheless, the meeting marked a material hawkish shift from the Fed, putting it on par with the likes of the RBNZ. The meeting minutes also revealed that the QT discussion saw majority of members thinking it appropriate to start QT soon after rate lift off and another more hawkish tilt than expected from the Fed. 2. Global Risk Outlook The growth & inflation outlook for the US and the globe will be key for the USD. The USD is often inversely correlated to global growth & inflation , doing bad during reflationary environments (growth and inflation accelerating), while the USD usually does well in disinflationary environments (growth and inflation decelerating). Thus, with expectations that both growth and inflation will decelerate this year, both in the US and the globe, that should be a positive input for the USD in the med-term . However, incoming data will also be important to see how the Fed responds to it, where a worsening outlook that deteriorates much faster than expected could see a dovish pivot from the Fed which could mean downside for the USD if money markets start pricing out hikes (especially with markets now expected just over 4 hikes for 2022). 3. CFTC Analysis Latest CFTC data showed a positioning change of -1458 with a net non-commercial position of +36434. The shortterm unwinding of stretched USD longs played out exactly as expected but was also short-lived in the midst of the recent strong risk off moves in certain parts of the market. Surprisingly, the big flush lower in the USD has not showed up in the CFTC data as expected with very little change to the overall positioning. In the current context, the stretched long positioning makes the USD vulnerable in the event that the Fed does not deliver the very hawkish tone expected of them in this week’s upcoming FOMC meeting. 4. The Week Ahead For the USD the big focus this week will be overall risk sentiment and the first FOMC meeting for 2022 on Wednesday, followed by Friday’s Core PCE and Employment Cost index prints. The latter will of course be important given the inflation outlook with more emphasis recently on the odds of a possible wage spiral affect. However, the main event will be the FOMC, where the meeting is expected to serve as a signalling meeting to pave the way for a 25bsp hike in March and to provide more clarity on the bank’s balance sheet plans. With a March hike sitting close to a 90% probability, and markets already fully pricing in 4 hikes this year, the bar has been set quite high for a hawkish surprise. However, there are also some participants that think the recent econ data ( CPI YY >7% and Unemployment <4%) justifies an early end to the Fed’s QE program instead of allowing tapering to run it’s planned course until March. That would certainly give a more hawkish feel to the meeting and could see markets pricing in an even earlier and faster pace of QT if confirmed. But, if the Fed does not deliver on an early end to QE , and does not offer a strong enough signal that the 4 hikes priced by the market is justified, we could be in store for some moderation in the rise in yields and the USD and could also prove to be supportive for equities which ended last week in quite bad shape.
by thunderpips
11