FUNDAMENTAL ANALYSIS
Jason Chen
AUD/USD
Fuelled by 2 strong trading days in the middle of the week, the Australian Dollar continued its trend in the previous week and rose slightly against the greenback, by 1.61% to 64 US cents. The Aussie Dollar extended its recovery against the US Dollar this week, after a decline in the hawkish bets on the Federal Reserve. Earlier this week, the US announced its Q3 GDP figures, above market expectations of 2.4% at 2.6%. Despite this, the greenback fell due to the data showing a reduction in consumer spending. This has led to a decrease in the expectation of a 75bps raise at the next Federal Reserve meeting in early November, putting downward pressure on the US Dollar. Furthermore, the ABS released the Australian inflation figures this week, with it being a 1.8% increase from the previous quarter and a rise of 7.3% year on year. This is the highest mark since 1990, leading many to believe that the RBA will once again raise rates by 50 bps at their next meeting rather than continuing with a smaller 25 bps raise as they did at the October meeting. Therefore, it is important to keep an eye on these meetings for hints on where the Aussie Dollar will head next.
GBP/USD
The Pound had a strong week against the greenback, rising to $1.16 to finish 2.73% higher. The Pound has fallen drastically over the last few months, with a combination of higher-than-expected inflationary pressures, as well as economic instability, being the key drivers behind a weak Pound. However, after the UK announced Rishi Sunak as the new Prime Minister, it seemed to have calmed the markets due to his promises of economic stability, starting by reverting to the promise of delivering the Conservative’s original 2019 manifesto rather than the raft of changes proposed by former Prime Minister Liz Truss. This is reflected in a decline in the UK GILT yields, stabilising around 3.3%, falling by almost a half percentage point after Rishi Sunak was announced. This is promising for the pound as it appears that the financial markets resonate with his more careful, prudent approach. However, given the vast number of fundamental issues still facing the UK economy, it will remain to be seen whether this recovery will continue in the medium term.
TECHNICAL ANALYSIS
Andrew Sun
AUD/USD
The Australian Dollar clawed back some of its losses from the past fortnight, gaining around 1.6% of its value on the back of a more hawkish Federal Reserve. Having broken down from the major support level at 0.668 two months prior, the Australian dollar is continuing its long term downward trend. It has failed to push above its next resistance level at 0.652 on significant volume and appears to be retesting the recent support level created at 0.635. The RSI of 40 further backs up the relative weakness shown by the Australian Dollar, so it will be interesting to see whether the Dollar can bounce from the green trendline and potentially form an uptrend over the medium term.
GBP/USD
The Pound sharply rebounded over the past week to trade 2.7% higher amidst a more stable political environment. After a rapid breakdown below the lower channel trendline near the start of October, the Pound has pared all of its losses since and has continued to trade within the channel that was formed in May. Most recently, the GBP has respected the channel after rejecting a push above its upper trendline on significant volume, highlighting investors’ belief that the Pound will remain bearish for some time. It will be interesting to see whether the Pound can reverse its bearish trend under the leadership of Rishi Sunak or if it will continue to drift towards parity.