AUD/USD, ASX 200 Analysis: Are the swing lows in for AUD/USD and the ASX?

Matt Simpson June 1, 2023 11:27 PM

A weaker USD has allowed the AUD/USD to recoup recent losses, whilst reduced bets of a Fed hike and a debt-ceiling deal with the Senate could be supportive of the ASX 200.

Australia

This image will only appear on cityindex websites!

20230602moversFX

 

Market summary

  • Patrick Harker became the latest Fed member to call for a pause in June, despite inflation falling at a “disappointingly slow” rate
  • Softer US economic data also saw odds of a June Fed hike fall to 21.6%
    • ISM manufacturing contracted for seventh month and fell below expectations, new orders contracted at a faster paces and prices paid declined (the S&P global US PMI read was also below expectations)
    • Jobless claims and layoffs were slightly higher

     

  • Wall Street was higher thanks to the debt-ceiling bill being passed over to the senate, a soft data pointing towards a Fed pause
    • The S&P 500 printed a marginal YTD high, the Nasdaq is within a cats whisker of its 13-month high and the Dow Jones lifted itself further form its 8-week lows

     

  • Gold rose for a third day and has now erased all of last week’s losses on bets the Fed are at (or very near) their terminal rate
  • Commodity currencies (AUD, NZD and CAD) were the strongest FX majors with GBP and EUR close behind as the dollar US dollar correction comes in to play
  • Softer inflation data for the Eurozone helped push EUR/GBP to the initial target around the daily S1 pivot
  • Yet EUR/USD closed firmly higher with a bullish engulfing day as ECB President Lagarde hinted at another hike by saying inflation remained too high and further tightening is required
  • A mixed manufacturing PMI report for China (Caixin) failed to fully revive sentiment following Wednesday’s gloomier report by a government agency (NBS)

 

Events in focus (AEDT):

  • 08:45 – New Zealand terms of trade
  • 11:30 – Australian lending (home loans, investment housing finance)
  • 22:30 – US Nonfarm payroll report

 

ASX 200 at a glance:

20230602ataglanceFX 20230602asx200FX

 

  • A small bullish candle formed at trend support and a 61.8% Fibonacci ratio
  • A stronger lead from Wall Street and higher SPI futures suggest positive sentiment heading into the weekend
  • A bullish RSI divergence has formed on RSI (2) daily chart
  • Bias remains bullish above this week’s low and for an initial move to 7200

 

 

AUD/USD daily chart:

USD weakness has allowed AUD/USD (among others) to recoup some losses. But the fact a false break of 0.6500 was followed by such a strong bullish engulfing candle suggests there could be further gains to follow as it moves back into range. Furthermore, traders can now focus on the hot CPI print delivered earlier this week and the increased potential for an RBA hike on Tuesday. A potential bull flag is forming on the intraday timeframes, so we’re now looking for a break above yesterday’s high - which also takes it bac above the March and April lows – and see how far it can go within its prior range. Of course, a threat to the bull camp is if NFP numbers come in exceptionally strong tonight.

20230602audusdFX

 

  

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

 

TAGS:
AUD/USD Australia

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, commodity futures, or digital assets, 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 StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account