21st October 2020 - AUD extended losses after the RBA suggested further monetary tightening.


Good Morning,

Market Headlines

US equity markets rose on optimism a US fiscal stimulus deal could be agreed soon, following signals from the key participants. The S&P500 is up 0.5%, and bond yields are higher, and the defensive USD is lower. US 2yr treasury yields remained around 0.15%, while the 10yr yield rose from 0.76% to 0.80%. Commodities, Brent crude oil futures rose 1.0% to $43.05, copper rose 2.0%, iron ore rose 0.3% to $119.30, and gold rose 0.4%.

Currency

AUD/USD: 0.7021 – 0.7072

EUR/USD: 1.1760 – 1.1841

GBP/USD: 1.3011 – 1.2979

USD/JPY: 105.46 – 105.75

USD/CAD: 1.3105 – 1.3204

NZD/USD: 0.6555– 0.6594

AUD/JPY: 74.16 – 74.61

AUD/NZD: 1.0709 – 1.0725

AUD Thoughts

- AUD/USD shrugs off bearish pressure and turns positive on the day.

- The aussie extended losses after the RBA suggested further monetary tightening.

- The pair approached multi-month lows at 0.7005.


The Aussie has visited four-week lows on Tuesday, to find support only 15 pips short of 0.7005 (September 25 low). A clear move below that level might increase confidence for the bears and push the pair towards 0.6920 (July 7,10 lows) and 0.6815 (June 22 low). On the upside, the pair should regain the 100-day SA, at 0.71000 to regain upside momentum and extend towards 0.7200 (50-day SMA) and 0.7240 (October 9 high).

Event Risk Data Today

Australia: The Sep Westpac-MI Leading Index is likely to see a significant improvement as consumer and unemployment expectations respond to stimulus (prior: -2.56%). Market expects preliminary retail sales for September to be up slightly, +0.5%.

UK: Annual CPI inflation is likely to increase in September, reflecting the unwinding of the government’s takeaway subsidy scheme (prior: -0.4%, market f/c: 0.5%).

US: The Federal Reserve’s Beige Book will shed light on the economic recovery across the 12 Fed districts. The FOMC’s Mester (01:00 AEST), Kashkari (03:00 AEST) and Kaplan (03:00 AEST) will all speak.

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