AUD/USD: Commodity and stock prices weighing on the high beta pair; Eyes on the 0.7165 13th November low

  • AUD/USD is currently trading at 0.7215 at the tie of writing, down from the highs of 0.7274 although has recently recovered from the European lows of 0.7195 traded from pressures in lower metals and global stock prices. 
  • Its all eyes on nonfarm payrolls and ears to the ground for global trade headlines and various geopolitical news.

AUD/USD has travelled from 0.7393 early Dec highs within a descending channel, underperforming as commodity currencies lose out to the big dollar rising since Nov lows in the DXY. Trade wars have continued to be a theme, despite the handshake cease-fire between Chin and the US as investors prefer to stay o the side of caution while the 90 day’s plays out. Global growth concerns have emerged from under the carpet which weighs on the stocks markets and high beta-FX such as the antipodeans. 

“Global growth fears and trade pessimism have returned to the market as the yield curve aggressively flattens, and the arrest of Huawei CFO Meng Wanzhou threatens the trade truce. Indeed, copper prices have reverted closer to the range that would trigger additional CTA shorts, should prices fall to the $6033/t level, while recent short covering in the lead has been halted,” analysts at TD Securities explained.

“Equity markets remain under heavy pressure, and this is keeping commodity-linked currencies on the defensive. AUDUSD has fallen to challenge the key 0.72 pivot. Near-term short positioning may be stretched we think there may be room to extend before the pair looks oversold. A close below that threshold could suggest a test of the October lows at 0.7020,” the analysts at TD Securities noted.

Key data sound bites

AS far as data goes, the Aussie retailers reported a 0.3% lift in sales in October, in line with market expectations. It was a solid report overall but will not stem the dovish turn in the RBA expectations. AUD/USD broke 38.2 Fibo of 0.7021/0.7394 at 0.7251 with stops triggered below. “While sales growth is still not strong it’s looking a touch better than it did mid-year, annual growth having lifted from 2.9% in June to 3.6% currently” analysts at Westpac argued.

Nonfarm payrolls 

“FX likely to view payrolls with an asymmetric bias; USD has been stable despite aggressive Fed repricing so a payrolls beat should not impact the USD as much as a disappointment,” analysts at TD Securities explained. 

  • The US initial jobless claims are expected to reach 224K in the week ending November 30.

AUD/USD levels

We have some minor support around 0.7190/7200 / (55-day MA at 0.719). The next support comes in at 0.7131 at S3. A break of 0.7100 opens 0.7021 2018 lows. Bulls need to get above 0.7280 and the confluence of the 23.6% Fibo of 2018 range and the 10-D SAM to target R1 at 0.7391. “The near-term uptrend at .7256 has been eroded to leave attention on the 55-day ma at 0.7191 and the .7165 13th November low. Failure here would suggest a retest of the 0.7022 recent low. We regard 0.7022 as an interim low. We have TD support at 0.6995 and below 0.6995/75 targets 0.6827 the 2016 low,” analysts at Commerzbank explained.