FUNDAMENTAL ANALYSIS
Jason Cheung
AUD/USD
Over the past week, the Australian dollar continues to decline by 0.63% as it experiences an unfavorable disparity in rates. The Fed’s decision to raise interest rates by 75 basis points compared to the RBA’s rate hike of 25 basis points has strengthened the US dollar, increasing the volume of international investors looking to lock in higher rates on their returns. Third quarter Australian CPI data will be released at the end of this month, as well as unemployment and the latest inflation rate figures. Over in the US, their inflation rate figures will be announced on Thursday. It will be interesting to see if the Fed will retain a hawkish stance on rates, which will be likely given that the inflation rate still stands at 8.3%, meaning that the market is still pricing a 75 basis point hike at the next FOMC meeting in early November. Ideally, an inflation rate of around 3% will most likely see the Fed push back on their aggressive rate rises, but it will be unlikely to see this come to fruition in the shorter term. With the RBA’s dovish stance on inflation compared to other central banks, AUD/USD has declined the most.
GBP/USD
The Great British Pound has seen a decline of 1.98% over the past week, after staging a late rally near the end of the week. Traders are suggesting this comeback won’t last, as they continue to run the rhetoric that a long-term downward trend remains. In other news, the Pound has been referred to as ‘high-beta’ quoted by Kamal Sharma, currency strategist at the Bank of America, which is an indicator of sensitivity to global risk appetite. This means that the currency is relying heavily on inflow of foreign investment to sustain its current valuation which we’ve seen a significant decline, reflected by bear markets within global equities in 2022. Again, it will be interesting to see how the GBP will respond to US inflation data on Friday, and how that would affect the currency pair in the following weeks, but strong bearish sentiment continues to weigh down on the Pound.
TECHNICAL ANALYSIS
Anton Ragusa
AUD/USD
The Aussie Dollar continues the trend of weakness against the US Dollar. Establishing new lows at the 0.6365 US Dollar mark, it is likely going to continue to head lower in the near future in the current economic climate and Federal Reserve policy. The congregation of major support levels above the 60 cent mark will provide the AUD with some short term relief. With the level unlikely to be broken by any news which is not a major catalyst for the US dollar, it is likely that the AUD continues into these areas before making a push upwards towards untapped liquidity resting in the 0.68 region. However, a move such as this may be several months away and it is more likely that the AUD will sit above these strong support levels in the coming months and absorb selling pressure until the Fed reverses on their current rate hike trajectory.
GBP/USD
The Pound continues its struggle against the US Dollar, with key data coming out next week likely to be bearish for the Pound. As such, the market continues to price in the expected bearish outcomes of these announcements. The current price action shows bearish conditions for the Pound, with major resistance at 1.146 USD causing a major rejection of price in the past week, which signals a bearish week ahead for the Pound. However, it is likely to rebound off approximately the 1.08 USD zone, as the market is currently pricing in the worst outcomes of the upcoming data, therefore, when the data comes in at a better than market expectations, the Pound will find some short term relief as short positions begin to cover. Overall the GBP is long-term bearish against the USD, reaching levels not seen since the 1985 UK recession, and thus is likely to continue lower for the time being.