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AUSTRALIA DOLLAR FUNDAMENTAL PROGNOST: BEARISH
- AUD / USD Range trading last week could break next week
- The language of the RBA and Fed must be closely monitored AUD/USD direction
- Risk assets outside equities are weighted by the strength of the USD.
The Australian dollar spent the week pegged, which is no surprise due to a lack of data and news. Some of the business and consumer confidence data released during the week did not help motivate the market, and all eyes are on the key data for the following week. Minutes of the RBA meeting will be published on site on Tuesday, followed by employment numbers on Thursday. The RBA has recently changed its slightly curved tone and the market is looking for the extent of its prejudices in the protocols. This is especially true given the increase in Delta variant coronavirus cases in New South Wales. RBA Assistant Governor Kent will speak on Friday and may provide additional insight from a central bank perspective.
DIFFERENCE BETWEEN AUSTRALIAN DOLLAR AND GOLD RISKS with S&P 500
The Australian dollar is often seen as a risk-taker, and as central banks around the world try to reject highly relaxed policies, the Australian dollar could fall again after recovering from a high in February. Interestingly, other risk assets are mixed and many stock indices have hit new records this week, unlike many commodity markets, which are higher since the beginning of the year. The table below illustrates S&P 500 Against the AUD and gold.
AUD / USD AND GOLD VERSUS S&P 500 YEARS OF PERFORMANCE
Looking at the AUD against this risk differential, we can assume that we are strong US dollar it governs commodity and foreign exchange markets, and from a fundamental point of view, this makes sense, as the Fed is behind other central banks with a view to easing incentives to keep the US economy at a higher level. The FOMC the minutes of the meeting will be published in the middle of the week and the market will start screening the minutes to show the timing of the downgrade.
At the same time, the ongoing regulatory repression in China has continued to contain iron ore prices. The Central Committee of the Chinese Communist Party and the Council of State jointly issued a document this week that is far-reaching and could have significant consequences for Australian exports to China. This will probably add extra weight to the AUD.
– Written by Dan McCarthy, DailyFX.com strategist
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