AUD/USD, ASX 200 Analysis: Market Brief - 30th May 2023

Market summary

• US and UK stock markets were closed yesterday and some futures markets had limited trading hours due to the 3-day weekend
• The debt ceiling deal is ready to make its way over to congress for the required vote to officially get it over the line
• Both Biden and McCarty claim to have enough votes to seal the deal, but the hurdle must be cleared for them to successfully kick the can down the road
• Some hard-right Republicans were quick to hit the wires and push back and vowed to block the deal, leaving an air of uncertainty over the deal
• US index futures posted modest gains in cautiously optimistic trade, with the growing realisation that it simply changes (but not solves) the problem and that they’ll likely have another Fed hike to contend with in June
• China has rejected a US request for defence chiefs to meet on the side lines at an annual security forum in Singapore this weekend
• The US dollar rally – fuelled by Fed-hike bets and apparent debt-ceiling deal – took a pause in low-liquidity trade.
• This allowed AUD/USD to retrace higher for a second day and USD/JPY pull back from its 6-month high but held above 140
• Meanwhile, EUR/USD remains locked near last week’s lows as it eyes a potential break below 1.0700 (but the longer it fails to do so, the greater the odds of a countertrend bounce)

Events in focus (AEDT):

• 09:30 – Japan’s employment report
• 11:30 – Australian building permits
• 19:00 – Eurozone business and consumer survey, consumer inflation expectation

ASX 200 at a glance:

Close: 7217.4 (0.71%)
Daily trading volume: 502.6 mn
138 stocks advanced
17 stocks were unchanged
45 stocks declined

• The ASX enjoyed its most bullish day in 7 weeks
• However, prices jumped to the high of the day at the open then drifted lower throughout the day as debt-ceiling news was already priced in
• A daily shooting star formed on the IT and communication sectors to warn of trend exhaustion over the near-term
• A potential bear flag is forming on the daily chart of the consumer discretionary sector
• SPI futures are down -0.18%, pointing towards a slightly soft open

AUD/USD 4-hour chart:

The Aussie retraced against its bearish trend for a second day, during low-liquidity trade. A bearish engulfing week saw it close to a fresh YTD low, so a retracement against that move seems healthy, and may provide another opportunity for bears to re-enter at or around resistance levels. For today, we’re looking for evidence of a swing high within the 0.6500 – 0.6572 range, which includes the weekly pivot, March and April low. Should prices continue to rise, 0.6600 is the next line of defence for bears – a break above which could see prices return towards the two weekly VPOC’s around 0.6650.

Asia Data Calendar (AEDT):

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

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge