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Australian dollar under threat as the new week begins, a look at USD/JPY and the threat of intervention

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Australian Dollar, AUD/USD, US Inflation Expectations, USD/JPY – Asia Pacific Market Opening

  • Australian dollar at risk after Friday Wall Street volatility
  • Higher inflation expectations in the US open the door to a more hawkish Fed
  • Asia Pacific Economic List, Clock USD/JPY for intervention

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Briefing on the market of the Asia-Pacific region

Asia-Pacific markets could be looking at a downbeat start to the new trading week after volatility hit Wall Street on Friday. Heavy machinery Nasdaq 100 fell more than 3 percent S&P 500 weakened by 2.29 percent. Risk aversion correlates with the sentiment-sensitive Australian dollar AUD/USD decreased by 1.62%. He behaves similarly New Zealand dollar met the same fate.

Looking at the chart below, markets initially showed some optimism on softer-than-expected US retail sales. However, that quickly changed course a couple of hours later when data from the University of Michigan (UofM) crossed the wires. Consumer inflation expectations for 1 year rose to 5.1% against the expected 4.6%. This is probably a problem for the Federal Reserve.

Just a day earlier, on Thursday, US CPI data beat estimates across the board. This report, along with the UofM data, shows that inflation expectations are at risk of drifting away from the Fed’s long-term target. This can create a perpetual cycle in which consumers do not believe that inflation will fall, forcing them to act in their self-interest to either protect their wages or seek higher paying roles.

This also has implications for businesses, increasing operating costs and likely driving up prices. A look at 2-year Treasury yields showed the rate rose more than 4.5% as traders priced in a tighter Fed, which will have to step up its fight against inflation. The US dollar got up. Related to growth crude oil prices weakened as tightening concerns dampen global growth prospects. gold weakened.

Information in the Asia-Pacific region is rather light on Monday, which puts the focus of traders on the general sentiment. Australia ASX 200 and Japan Nikkei 225 the risk of following in the footsteps of Wall Street. Risk Sensitive AUD/USD vulnerable Keep a close eye on the USD/JPY. The pair reached its highest level in 32 years despite attempts by the government to intervene a few weeks ago. Further action is likely to push the yen higher.

Volatility of the Friday session on Wall Street

The chart is created in TradingView

Technical analysis of the Australian dollar

AUD/USD closed at its lowest level since April 2020, finding this month’s low of 0.5980. Prices also closed below the 61.8% Fibonacci retracement level at 0.6206, but no confirmation. Further losses focus on the 78.6% level at 0.6113. A positive RSI divergence indicates that the bearish momentum is fading. The pivot above focuses on the 20-day simple moving average (SMA).

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AUD/USD Daily Chart

AUD/USD Daily Chart

The chart is created in TradingView

— Posted by Daniel Dubrowski, DailyFX.com strategist

To contact Daniel, use the comment section below or@ddubrovskyFXon Twitter

https://www.dailyfx.com/news/australian-dollar-at-risk-as-new-week-begins-eyes-on-usd-jpy-and-intervention-threat-20221016.html

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