AUD/USD, ASX 200 Analysis: Asian Open - 7th July 2023

Market summary

• Risk-off trade saw the Japanese yen and Swiss franc dominate the currency space overnight, sending USD/JPY to a 7-day low of 143.56 and USD/CHF roll over from the top of its 3-week range from 0.9000
• Bond yield curves continued to invert and price in a hard landing, which kept indices on the ropes from the Asian session through to the end of the US session
• Wall Street indices gapped lower and saw the S&P 500 and Nasdaq 100 both filling Friday’s opening gaps before recouping parring losses and closing with a (potential) bullish hammer candles
• Commodity currencies (CAD, AUD and NZD) were the weakest FX majors, falling alongside indices and even gold during a risk-off session
• Gold failed to attract a safe-haven bid as stronger US economic data bolstered bets of further Fed hikes and sent yields higher, falling down to 1902 (in line with yesterday’s bias) although the initial retracement higher was deeper than desired
• ADP employment rose nearly 500k, job layoffs were lower and the ISM services index bear expectations (with rising new orders, business activity and employment) – all on the eve of NFP
• It was a volatile session for WTI crude oil which fell from just below $72 to nearly $70 and back to its open price, as investors grappled with inverted yield curves, strong economic data and lower oil inventories (stronger demand)
• Ultimately, WTI seems to be a short-term traders’ market over a longer-term investors’ at present

 

Events in focus (AEDT):

• 09:30 – Japan’s earnings, household spending, foreign reserves
• 22:30 – US nonfarm payroll report, Canadian employment report

 

 

ASX 200 at a glance:

• 77.5% of ASX 200 stocks declined yesterday
• 1-day implied volatility spoked to a 7-day high of 48.71 points
• It closed beneath its 200-day EMA but held above its 200-day MA
• RSI(2) is not yet oversold, although the 200-day MA may provide a degree of support
• Bulls may want to step aside until sentiment improves, and bears may want to be cautious around these current lows

 

 

 

AUD/USD 1-hour chart:

AUD/USD is on track for its third bearish week and came close to reaching a 23-day low yesterday before retracing back above 66c. Strong volumes accompanied the decline, but have receded whilst prices drift higher (which assumes the cycle higher is corrective). It is not uncommon to see prices retrace against strong moves during thin trade, although its upside may be limited today due to NFP (unless it surprises with a weak print). But given the strength of economic data, we suspect the US dollar will retain / regain its strength of NFP comes in strong like ADP employment did. And that could see prices retest or even break below 66c. 

 

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge