FUNDAMENTAL ANALYSIS
Jason Cheung
AUD/USD
The Australian dollar against the greenback has increased over the past week by 0.45% ahead of the RBA’s decision to increase interest rates by 0.25%. Most analysts are expecting that the RBA will continue rate hikes of 0.25-0.50% in the coming months to tame the stubbornly high inflation figures. Data published last week showed that inflation jumped to 7.3% in the third quarter, a 1.2% increase from its previous quarter. Last week, Australia’s Treasurer, Jim Chalmers, said he believes that inflation will end the year at approximately 7.7%. Over to the US, the Fed will most likely react with a potential rate hike of 0.75% which will pose a potential decline of AUD/USD, as more international investors will hold onto USD to lock in higher rates of return. Lastly, China, Australia’s largest two-way trading partner in goods and services, released its PMI data. China’s manufacturing PMI declined from 50.1 to 49.2 while non-manufacturing dropped to 48.7. A bearish influence continues to bear on AUD/USD, and positive news is required to see a potential recovery in the future.
EUR/USD
The Euro has increased by 0.15% over the past week, developing a support line at the 0.98 level. This comes over the ECB rate decision expected to bring another rate hike of 75 basis points, after the Eurozone’s inflation coming at 10.7%, against the consensus of 10.2%. This means that the ECB, akin to Fed, will bring steeper rate hikes in the coming months in order to lower inflation. It will be interesting to see how this news will affect EUR/USD and whether we will observe a promising uptrend in the following weeks. However, increasing tensions in Europe may continue the EUR/USD downtrend in the medium to long-term.
TECHNICAL ANALYSIS
Anton Ragusa
AUD/USD
The Australian dollar continues its short term rally against the USD. After finding strong support at 62 cents, the AUD has consistently made higher lows, rallying into the important 65 cent resistance, where the descending trendline and resistance level both act to suppress price. Subsequently the AUD retraced previous gains and dropped from 65 cents to 64 cents, and is unlikely to find support until the 63-63.5 cents area, where the ascending trendline and support levels are placed. Overall the AUD’s longer term direction likely rests on the direction which it breaks out of the pennant formation (indicated in white), which will be catalyzed by the FED’s monetary policy decisions in the coming weeks.
EUR/USD
The EURO continues its surprising run against the USD despite increasing tensions in Europe, moving from lows not seen since 2002 at 96 cents, back to 1 USD, where it faces heavy resistance at the prior support level. Consistently making higher lows over the past month, the EURO is likely to continue its upwards trend, as the ECB likely pursues tighter monetary policy, with the trendline (white) acting as strong support on the uptrend. If this level breaks however we would likely see a retest of levels around 98 cents, where price will likely rebound. However, if the support level holds then the EURO may break back above the 1 USD mark and settle comfortably above it. Overall the EURO against the USD will continue to progress upwards as long as the trendline and main support levels holds.