- AUDUSD remains pressured on witnessing downbeat catalysts from home.
- RBA MPS cuts economic forecasts, Australia’s Q3 Retail Sales eased.
- Pre-NFP trading lull restricts immediate moves even as DXY bulls take a breather.
AUDUSD extends pullback from intraday high to 0.6290 after unimpressive updates from the Reserve Bank of Australia’s (RBA) Monetary Policy Statement (MPS), as well as relating to the third quarter (Q3) details of Australia’s Retail Sales, published early Friday. It should be noted, however, that the market’s cautious mood ahead of the US jobs report restricts immediate moves of the Aussie pair.
RBA’s quarterly release of the MPS conveyed deteriorating growth prospects and higher inflation. Even so, the Aussie central bank defends the latest rate hikes. “Australia’s central bank on Friday downgraded the outlook for economic growth, warning that more rate hikes will be necessary to bring down sky-high inflation even as it strives to avoid an outright recession,” said Reuters following the release. Additionally, Australia’s Q3 Retail Sales eased to 0.2% QoQ versus 0.4% expected and 1.4% prior.
It should be noted that the fears emanating from China, North Korea and Russia, as well as the firmer US dollar, keeps the AUDUSD sellers hopeful amid a sluggish session.
On Thursday, the US Dollar Index (DXY) rose the most in nearly a week despite mixed US data and downbeat inflation expectations. The reason could be linked to the market’s fears of higher rates and economic slowdown, as conveyed by policymakers from the Bank of England (BOE), the US Federal Reserve (Fed) and the European Central Bank (ECB).
Talking about the data, US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior. On the other hand, US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, dropped to the lowest levels since October 19 and 13 in that order.
At home, mixed data from Australia and China also exerted downside pressure on the AUDUSD prices of late. That said, China’s Caixin Services PMI for October dropped to the lowest level in five months while flashing 48.4 figure versus 49.3 prior. Further, Australia’s trade surplus increased to 12,444M in September versus 8,850M expected and 8,324M prior while the Exports rallied by 7.0%, compared to 2.6% prior. However, the growth of the Imports dropped to 0.4% versus 4.5% prior.
Earlier in the day, Australia’s AiG Performance of Construction Index for October eased to 43.3 versus 46.5 prior.
Against this backdrop, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007. It should be noted that the S&P 500 Futures print mild losses while the yields are sidelined at the latest.
Having witnessed the initial reaction to the key data/events from Australia, AUDUSD traders may witness a lackluster session ahead of the US employment report for October. Forecasts suggest that the headline US Nonfarm Payrolls (NFP) could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior. That said, the downbeat forecasts for the scheduled statistics signal a corrective move from the key support line in case of a surprise.
Also read: US October Nonfarm Payrolls Preview: Analyzing gold’s reaction to NFP surprises
Technical analysis
AUDUSD bears need a daily closing below a three-week-old support line, around 0.6275 by the press time, to aim for the yearly low of 0.6170. The recovery moves, however, remain elusive below October’s peak of 0.6525.