20th October 2020 - AUD/USD retreats back below 0.7100 as Wall Street turns negative


Good Morning,

Market Headlines

US equity markets dropped back in red territory with a lack of progress on US fiscal stimulus negotiations. The S&P500 is down 1.7%, with bond yields and risky currencies reversing early gains. Commodities, Brent crude oil futures fell 0.6% to $42.70, copper rose 0.6%, iron ore fell 0.1% to $118.95, and gold rose 0.4%.

Currency

AUD/USD: 0.7059 – 0.7114

EUR/USD: 1.1704 – 1.1794

GBP/USD: 1.2933 – 1.3024

USD/JPY: 105.30 – 105.50

USD/CAD: 1.3151 – 1.3191

NZD/USD: 0.6605– 0.6646

AUD/JPY: 74.45 – 74.92

AUD/NZD: 1.0685 – 1.0716

AUD Thoughts

The AUD/USD pair peaked earlier at 0.7114, the highest level since last Thursday, boosted by risk appetite and a weaker US dollar. After the beginning of the US trading session, the aussie lost strength, trimming gains. The retreat in AUD/USD is taking place as equity prices in Wall Street are now in red. The Dow Jones failed to hold onto gains and is falling 0.15% and the Nasdaq loses 0.5%. Both indexes opened in positive territory supported by expectations about new fiscal stimulus in the US and Chinese economic data.

AUD/USD continues to move with a bearish bias after being unable to hold above 0.7100 and also as it trades back below the 100-day moving average that stands 0.7099. The immediate support might be seen at 0.7065, followed by the 0.7000 area. A firm recovery above 0.7130 (20-day moving average) would ease the negative momentum.

Event Risk Data Today

Australia: Weekly payrolls (to Oct 3) will be released. The fortnight prior saw a modest increase of payroll jobs circa 0.3%. The October RBA meeting minutes will provide additional colour on the Board’s view of risks to the economy and the outlook for policy. The RBA’s Assistant Governor (Financial Markets) Kent will also give a speech at the IFR Australia DCM roundtable webinar (10:00 AEST).

NZ: The Q3 QSBO survey of business opinion should see a sharp rise from the weak June result of -58.8, although activity is still expected to remain below pre-Covid levels.

US: Housing starts (prior: -5.1%, market f/c: 2.8%) and building permits (prior: -0.9%, market f/c: 2.0%) are stabilising after a rapid recovery in Q2/Q3. The FOMC’s Quarles (01:50 AEST), Evans (04:00 AEST) and Singh (04:30 AEST) will all speak.

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