16th November 2020 - AUD/USD eyes a retest of prior uptrend


Good Morning,

Market Headlines

Sentiment was upbeat on Friday, despite rising Covid cases in the US and Europe and associated restrictions. The S&P500 rose 1.4% to a fresh record high close, bond yields rose slightly, and the defensive US dollar fell slightly. Commodities, Brent crude oil futures fell 1.7% to $42.80, copper rose 1.0%, iron ore fell 0.5% to $122.55, and gold rose 0.7%.

Currency

AUD/USD: 0.7229 – 0.7273

EUR/USD: 1.1802 – 1.1837

GBP/USD: 1.3126 – 1.3200

USD/JPY: 104.57 – 105.15

USD/CAD: 1.3116 – 1.3170

NZD/USD: 0.6811 – 0.6849

AUD/JPY: 75.76 – 76.30

AUD/NZD: 1.0596 – 1.0630

AUD Thoughts

AUD/USD has recovered nicely from weekly lows set on Thursday of around 0.7220. The pair is thus now eyeing a retest of an uptrend that it broke below on Thursday that links the 3 November high and the 6, 10 and 11 November lows, which ought to come into play before 0.7300.

To the downside, most immediately, there is the 23.6% Fibonacci retracement between the November low (at roughly 0.7000) and high (at roughly 0.7340), which comes into play just below current levels of 0.7260.

However, this level did not offer much resistance on Friday and so is likely to not provide much support either. Better areas of support to note are the weekly low around 0.7220 and the 38.2% fib retracement from the November high to low at just above the psychological 0.7200 level.

Event Risk Data Today

Australia: RBA Governor Lowe will speak on “Covid, Our Changing Economy and Monetary Policy” at the CEDA Annual Dinner (Sydney, 7:40pm). The ABS will release the October update of the “Household Impacts of COVID-19” survey.

New Zealand: The October Business NZ PSI should reflect ongoing pressure from the border closures on the services sector.

Japan: Whilst the market expects that GDP will rebound 4.4% in Q3, this will only partially offset the 7.9% contraction from the second quarter.

China: October data for industrial production (mkt f/c: 1.6%yr ytd), retail sales (mkt f/c: 5.5%yr) and fixed asset investment (mkt f/c: 1.5%yr ytd) should point to the broader recovery in economic activity and the effect of government support.

US: The November Fed Empire State index will be buoyed by recent strength in orders and employment, but renewed concerns around restrictions pose a risk. To round out the day, Fed Vice Chair Clarida will discuss the economic outlook (06:00 AEDT).

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