29th September 2020 - AUD/USD: Directs pullback moves toward 0.7100 amid risk-on mood


Good Morning,

Market Headlines

End of month flows and portfolio rebalancing could be what has driven the spike in the benchmarks on Monday, combined with hopes of stimulus talks and possible progress to end the stalemate between the Democrats and Republicans, as telegraphed in this week's weekly forecast. Across the pond, there was also a positive air of expectation around the UK-EU trade talks which may have been playing their role on wall Street. Also, the European Central Banks president Lagarde hinted at more easing if necessary.

Consequently, all combined, the Dow Jones Industrial Average rose 410.1 points, or 1.51%, to 27,584.06, the S&P 500 added 53.14 points, or 1.61%, to 3,351.6 and the Nasdaq Composite put on 203.96 points, or 1.87%, to 11,117.53. Commodities: Brent crude oil futures rose 0.7% to $42.20, copper rose 0.6%, iron ore rose 1.0% to $117.00, and gold rose 1.0%.

Currencies

AUD/USD: 0.7037 – 0.7074

EUR/USD: 1.1623 – 1.1680

GBP/USD: 1.2764 – 1.2930

USD/JPY: 105.30 – 105.67

USD/CAD: 1.3355 – 1.3404

NZD/USD: 0.6540 – 0.6567

AUD/JPY: 74.10 – 74.64

AUD/NZD: 1.0754 – 1.0787

AUD Thoughts

- AUD/USD directs pullback moves toward 0.7100 amid risk-on mood

- Hopes of further money supply from the US and Europe join expectations of virus vaccine to boost market sentiment.

- Equities, commodities benefited the most whereas the US dollar is still not on the bears’ radars.

- US Presidential Election debate is the key event while Fedspeak may offer intermediate clues.

Looking forward, the economic calendar remains mostly silent during the Asian session and hence risk catalysts are mostly in demand. It should, however, be noted that the market’s cautious sentiment ahead of the first US Presidential Election debate between the current leader Donald Trump and the challenger Joe Biden may probe the bulls going forward. Also, the Federal Reserve policymakers’ likely optimism, observed from the latest comments, can renew the US dollar buying, which in turn will question AUD/USD buyers.

Successful bounce off 100-day SMA, currently around 0.7010, needs not only the break of the 0.7100 threshold but clearance of the August 12 low surrounding 0.7110 to probe 50-day SMA level close to 0.7205. Alternatively, a downside break of 0.7010 will require validation from the 0.7000 psychological magnet before recalling the bears.

Event Risk Data Today

Euro Area: The recovery in economic and consumer confidence is expected to be sluggish with as an increasing virus numbers. German CPI inflation is expected to decline by 0.1% in September, for an annual pace of 0.0%.

US: August wholesale inventories expected to decline (prior: -0.3%, market f/c: -0.1%). CoreLogic/S&P house prices are expected to rise increase for July (0.1%); Consumer confidence (Conference Board)has dropped to a new low in August of 84.8 as l unemployment benefits expired (f/c 90.0)

The FOMC’s Williams (23:15, 03:00 AEST), Harker (23:30 AEST), Clarida (01:40 AEST), and Quarles (03:00, 05:00 AEST) speaking.

The first US Presidential debate from Cleveland, Ohio will begin at 11:00 AEST Wednesday morning.

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