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Tuesday’s Asia-Pacific Forecast
The Australian dollar remains on solid footing after gaining overnight despite weak performance by US stocks on Wall Street. The Dow Jones Industrial Average (DJIA) closed 0.76% lower on Monday. Rising energy costs are fueling concerns that inflation may be more rigid than most economists and central bankers predicted. These higher costs could very well weigh on consumer spending in other sectors of the economy. A pessimistic report on GDP from Goldman Sachs Group Inc (all sessions) also weighed on sentiment. The US bank has lowered its growth target to 5.6% for 2021.
AUD / USD rose as coal prices surged in Asia. Beijing ordered energy producers to increase production last week, easing some upward pressure on prices. However, flooding across China halted mining operations. This sent coal futures in China to record highs on Monday, pushing the Australian dollar higher. Australia is a major exporter of coal and China has reportedly allowed small quantities to clear customs despite a ban on importing coal from its neighbor to the south.
Oil – US crude prices also rose overnight, further sparking inflationary concerns as crude oil hit its highest level since October 2014. Demand for energy products is increasing as economies come back in line following the Covid-19 restrictions put in place against the highly contagious Delta strain. New South Wales, Australia’s most populous state, eased restrictions on Monday. Vaccination rates in Australia have seen significant progress in recent months, allowing the reopening.
Elsewhere, New Zealand reported a 0.9% increase in e-card spending in September on a month-over-month basis. Later today, Japan will release data on bank loans and producer prices for September. The Bank of Korea (BOK) is expected to keep its benchmark interest rate at 0.75%. Traders will also be closely watching the UK employment report in July during the European session.
AUD / USD technical forecasts
AUD / USD made a solid move higher overnight, breaking through the 50-day Simple Moving Average (SMA). The upside momentum eased before hitting the psychologically important handle of 0.74, but the bulls appear to be in control for now. If prices fall, the 50-day SMA will return as potential support.
8 hour AUD / USD chart
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