Australian Dollar, AUD/USD, Wall Street, Covid, RBNZ – Talking Points
- Australian Dollar drops versus US Dollar as global sentiment erodes
- Traders keenly focused on today’s rate decision from the RBNZ
- AUD/USD finds support from 2020 levels after sharp drop
Wednesday’s Asia-Pacific Outlook
The risk-sensitive Australian Dollar fell sharply versus the US Dollar overnight. A broad sense of risk aversion throughout global markets dragged AUD/USD over 1% lower. The currency pair, which is often used to gauge risk-taking among traders on a global scale, is at its lowest point since November 2020. A disappointing US retail sales figure crossed the wires prior to the New York opening bell overnight, which fueled bearish bets.
Markets were already jittery after equity markets across the Asia Pacific region traded lower on Tuesday. Wall Street stocks reflected the risk-off move, with the benchmark S&P 500 index dropping 0.71% at the New York closing bell. In line with the breakdown in trading sentiment, other risk assets saw investors respond in kind. Bitcoin fell nearly 2.5%. Cryptocurrencies often respond to breakdowns in the broader market as investors flee to the safety of the Greenback.
The highly transmissible Delta Covid variant continues to overshadow the global economic recovery, with restrictive measures denting consumption, which lies at the heart of most economists’ concerns. Rising cases fueled by the Delta variant from Asia to the United States have worsened those slowdown fears. Australia’s most populous state, New South Wales (NWS), continues to see daily case counts rise despite being under a strict lockdown.
New Zealand entered a nationwide snap lockdown Tuesday after an Auckland resident tested positive for the virus, the island nation’s first case in nearly six months. Health officials confirmed the Delta variant was responsible. The lockdown is scheduled to last three days, during which time schools will conduct learning remotely, and nonessential businesses will close. The New Zealand Dollar fell versus most of its peers in response to the news.
Speaking of New Zealand, traders are watching for the Reserve Bank of New Zealand to release its interest rate decision. According to a Bloomberg survey, analysts expect the central bank to hike its official cash rate (OCR) by 25 basis points to 0.5%. Given the expectation that the RBNZ will hike, a surprise decision to hold the OCR unchanged would likely result in a downside move for the Kiwi Dollar.
AUD/USD Technical Outlook:
AUD/USD’s overnight drop has brought prices to an area of resistance turned to support from the October to November 2020 timeframe. The downward action formed after prices tested a Rising Wedge’s former support level, along with the falling 20-day Simple Moving Average. A drop below current levels could open the door up for prices to fall near the psychologically imposing 0.7000 level.
AUD/USD Daily Chart
Chart created with TradingView
Australian Dollar TRADING RESOURCES
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwateron Twitter