FUNDAMENTAL ANALYSIS
Jason Chen
AUD/USD
Off the back of an intense trading day on Friday, the Australian Dollar managed to end the week higher against the US Dollar, rising by 0.89% to finish at $0.6468 despite falling for four straight days over the first four trading days of the week. Earlier this week, both the Federal Reserve and the RBA had their key policy rate meetings. The Federal Reserve continued its aggressive rate hikes, raising the Federal Funds Rate by 75 basis points to set the target range at 3.75%-4%. The RBA however, was much less aggressive, increasing the cash rate by only 25 basis points to 2.85%. This caused the pair to move in the USDs favour. On Friday, the US Department of Labour announced mixed results, adding 261,000 jobs (which beat the 200,000 consensus estimate) but unemployment rose to 3.7%, above the market consensus of 3.5%. This caused the Australian Dollar to go on a massive rally on Friday, rising 3% to erase all the losses earlier during the week. Therefore, it will be interesting to see when the ABS announces Australia’s unemployment data and where the pair will head next.
EUR/USD
Similar to the story of the Australian Dollar, the Euro fell for the first 4 trading days of the week against the greenback before rising dramatically on Friday to close the week nearly flat, finishing at 0.9958, only 0.05% lower than the week’s open. Due to the weakening labour market conditions in the US with unemployment rising and wage inflation reducing from 5% to 4.7% in September, investors expect that inflationary pressures are finally slowing, leading to a less aggressive move by the Federal Reserve in the upcoming months. Combined with the Eurozone unemployment rate falling slightly to 6.6% from 6.7% the month prior, it would seem to support the trend of the Euro’s recovery against the Dollar back towards parity. Furthermore, the Producer Price Index, a measure of the inflation experienced by producers, fell sharply last month from 5% to 1.6%, below market expectations of 1.7% to have many believing that the inflationary pressures in this region are finally slowing. Therefore, it will be interesting to see the retail figures released next week to see whether consumption is also slowing, which will be a good indicator as to where the Euro heads next.
TECHNICAL ANALYSIS
Anton Ragusa
AUD/USD
The AUD finds itself in the middle of a range after an extremely volatile week, ending trading at 0.64285 USD, perfectly in between a strong support and resistance zone. With several key price sensitive announcements during the week such as the FED rate hike, the AUD saw a drop to 0.63, where it rebounded off of the rising trendline, which has been a strong support level for the past month. It is unlikely to break this support level under current market conditions and will likely continue to bounce between these levels until an economic catalyst causes the price to find a new value outside of this range.
EUR/USD
The EURO’s price action is almost identical to AUD, both being heavily affected by the FED rate hike in midweek and quickly recovering in the second half of the week. The EURO still faces the heavy resistance at 1 USD, which will require a serious change in European economic conditions to break, however with the rising trendline providing strong support of price, there are signs the EURO may break back above 1 USD, despite the current economic climate. Overall, the EURO’s price action will likely follow the same as the AUD, ranging in between these support and resistance levels until a serious catalyst comes into play and causes the breakdown of either level.