2022-12-16 • Updated
AUD/USD has been sliding lower and lower since the beginning of November, although it’s still a great deal away from October lows. Market sentiment has been more or less stable: there was plenty of news about the trade talks between the United States and China, but nothing really decisive has arrived. The Aussie’s fellow commodity currency, the NZD, has been doing much better in trading versus the greenback, and it’s natural that AUD/NZD has plummeted this month.
From the observations described above, we can make one evident conclusion: the AUD is under negative pressure primarily because of Australia’s domestic problems. Indeed, the seasonally adjusted private capital expenditure fell by 0.2% in the Q3 after declining by 0.6% in the June quarter. Inflation remains below the target, manufacturing and services PMIs point at industry contraction. Moreover, Australian employment suffered its sharpest fall in 3 years in October, while the unemployment rate rose to 5.3%.
The Reserve Bank of Australia will meet on Tuesday, December 3. According to the forecasts, the RBA will leave the cash rate at the record low level of 0.75%. Still, economists are talking about the need for urgent stimulus to revive economic activity and wages. The market has priced in an 11% chance of a cut in interest rates to 0.5%. As a result, the wording of the central bank’s statement will be quite important. Governor Philip Lowe underlined that negative interest rates and quantitative easings were not likely anytime soon but suggested that the RBA would implement QE when the cash rate hit 0.25%. Many analysts haven't considered such a big decline in the benchmark interest rate, so they lowered forecasts for the AUD. All in all, if the central bank’s statement contains worries about the national economy, traders will price in rate cuts next year and this will hurt the AUD. If not, the impact on the AUD will be closer to neutral.
Apart from the monetary policy decision, Australia will release a bunch of economic figures in the upcoming days. Here are the key indicators to pay attention to:
On balance, the forecasts imply a cautious approach to the AUD. Still, if there are big positive surprises, the AUD may jump up.
Finally, traders will keep monitoring the US-China story. For now, the key question is whether the Hong Kong Human Rights and Democracy Act signed by Donald Trump this week ruins the upcoming phase 1 trade deal or not.
AUD/USD formed a lower high and slipped below the daily MAs. Support lies at 0.6750 and 0.6725 ahead of 0.6670 (multi-year low). Resistance is at 0.6830, 0.6880 and 0.6930.
China has issued new oil product export quotas to allow oil companies to send surplus barrels overseas, particularly Sinopec, which has the highest volume among quota holders. While the exact quota volume remains undisclosed, oil companies are forecasted to export approximately 3.5 million metric tons of clean oil products in September, a 10% increase from August.
Thanks to the incredible advancements in horizontal drilling and fracking technology, the United States has experienced a mind-blowing shale revolution. They've become the heavyweight champion of crude oil production, leaving Saudi Arabia and Russia in the dust. They even turned the tables and became net exporters of refined petroleum products in 2011.
Oil prices rebounded slightly on Friday but are still expected to show losses for the week due to concerns about slowing growth in the US and China. US crude futures rose 2.7% to $70.41 per barrel, while the Brent contract increased by 2.5% to $74.33 per barrel.
The past several weeks have been a real triumph for the bulls in the oil market. The Brent spot price grew by 8.5% during the last month.
Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.
Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.
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