Australian dollar, AUD / USD, Covid, Japan, COT – call points
- Australian dollar prepares the Central Bank of Australia’s interest rate decision
- Covid cases reached record highs in Australia as NSW causes the majority of infections
- AUD / USD at the highest level for several months, but prices may be ripe to withdraw
Monday ‘s outlook for Asia – Pacific
The The Asia-Pacific session may be relatively quiet today as traders prepare for central bank interest rate decisions following last week’s strong performance of risky assets. The Reserve Bank of Australia (RBA) will announce a decision on the September interest rate on Tuesday. Economists are confused as to whether the RBA will suspend its plan to start reducing asset purchases. Such a move would probably be good for Australian equities, but it could put pressure on the AUD.
Victoria and New South Wales (NSW) remain closed as the number of Covid cases continues to rise. The highly transferable Delta strain has taken new cases to record levels every day. Australia reported 1,684 new cases of Covid this Sunday, including 1,485 from NSW. Policymakers are rapidly securing vaccines to increase efforts to achieve a 70% vaccination rate. This is when health policy experts agree that widespread closures can be reversed. Some analysts believe that the economic downturn is threatening in the third quarter, given the economic damage already caused by the restrictive measures.
Elsewhere, Japanese stocks may continue to outperform. Japan’s Nikkei 225 the index rose a whopping 5.38% last week. Prime Minister Yoshihide Suga’s resignation predicted an upward trend in Japanese stocks. Analysts believe Suga’s successor will take a more aggressive approach to fighting the Covid pandemic.
Today’s economic calendar is quite sparse, with Australia seeing the Ai Group Services index for August outperform the wires. Household spending data from Japan for July also hit the news. Later this week, China may offer more risk-averse potential, economic power in the August trade balance and inflation data, according to the economic calendar on Tuesday and Wednesday. US markets are closed on Monday, which could reduce liquidity at today’s APAC meeting.
Australian Dollar – Crib Positioning
The Australian dollar wants to make a third weekly advance US dollar. The CFTC’s latest Trader Commitment Data (COT) shows the long stakes made by non-trading traders (representing large speculators in the market) last week. At the same time, short stakes also decreased. Nevertheless, long AUD contributions remain at their lowest levels in 2020. The data may suggest that traders are taking profits, but are still confident that the Australian dollar may strengthen. The data may also be explained by some reduction in leverage in RBA decision-making.
AUD / USD technical outlook:
AUD /USDthe multi-week rally has brought the currency pair to its highest level since mid-July. Prices exceeded last week’s declining 50-day moving average (SMA). The level of past resistance from July may limit prices close to the psychological level of 0.7500. A pause higher would see a 100-day SMA and a 161.8% Fibonacci extension in focus.
Alternatively, prices could move back to a 50-day SMA. There would be an earlier downward trend line under it and on the plate. According to the Relative Strength Index (RSI), the current gear may be overstretched and ripe for retraction. Typically, an RSI reading above 70 suggests that prices may be overbought. The RSI is currently close to the 76-hour chart at 76 marks.
AUD / USD Eight-hour chart
The chart has been created TradingView
Australian dollar trading resources
– Written by Thomas Westwater, DailyFX.com analyst
Be in touch Thomas, use the comments section below, or @FxWestwaterTwitter