AUDUSD reclaims all ground lost in September - What comes next?
Tony Sycamore October 8, 2021 1:08 AM
U.S. stock markets closed higher overnight after lawmakers reached an agreement to extend the debt ceiling until December.
The improvement in risk sentiment helping the AUDUSD to close higher at .7315 (+0.60%), recovering all ground lost during September after a series of headwinds hit, including;
- Iron ore falling over 20%
- Higher U.S. yields providing support for the U.S. dollar
- The fall of Evergrande
- APRA has begun to tighten lending requirements which in theory delays the need for the RBA to start raising rates.
- Production cuts in China to comply with energy intensity targets a significant drag on Chinese growth.
Possibly contributing to the AUDUSD’s outperformance, after 106 days in lockdown, restrictions begin to ease this weekend in NSW, and Sydney looks set to make the most of it.
Restaurants, bars, and shops re-open. School resumes the following week with all kids back to school by October 25th, and holidays are again on the agenda.
Further helping the AUDUSD, an assumption that Chinese steel mills will increase production as power caps are lifted and after the National Development and Reform Commission (NRDC) urged miners to secure long-term coal supplies to generate electricity.
Overnight the CEO of Brazilian iron ore miner Vale told an industry conference that the iron ore market was “relatively tight” and will be “more balanced” going forward.
Turning to the charts, the AUDUSD appears to have carved out a potential inverted head and shoulders bottom on the intraday charts, noteworthy as the market sits very short the AUDUSD.
Should the AUDUSD break/close above the .7320/40 resistance area after tonight’s non-farm payrolls data, I would expect to see a short-covering rally commence with scope towards .7500c.
Source Tradingview. The figures stated areas of October 8th, 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.