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Global Market Update
The View from Australia

Craig Killaby January 11, 2021

Data/Speakers

 

> AU December MI Inflation Gauge : 0.5% v. 0.3% prev.

> AU November Retail Sales : 7.1% v. 7.0% exp.

> CN December CPI & PPI : 0.2% & -0.4% v. 0.0% & -0.7% exp.

 

Overnight Headlines (BBG)

> US Speaker of the House Pelosi announced that articles of impeachment have been brought forward, with pressure mounting on US VP Pence to enact the 25th Amendment to deem Trump unfit for office

> UK regulators have taken aim at Bitcoin following the monumental rally, seeing the price drop over 20% in the last few days

What you need to know

It was a rare day of price action across markets yesterday, with the political tensions in the US causing the Dollar to strengthen as the final days of Trump’s Presidency may be closer than initially thought. The Aussie looked weak to start the trading week as the news flow from the weekend surrounding impeachment articles put downward momentum on risk assets while the USD saw a bout of strength with the DXY up 0.4% on the day. Hurting the AUD was commentary from the US on further actions on China, with the tensions between the two sides still high. The Aussie hit a low of 0.7668 during the US session, although rebounding later in the session to open this morning a touch above the 0.7700 handle.

US equity markets had a negative start to the week as signs of a bubble start flashing as the COVID19 cases surge across the world as the vaccine rollout goes much slower than initially planned. Local markets finished the day in the red, with the ASX down 0.6% despite the November retail numbers showing Victoria rebounding nicely following the strict lockdown. There continues to be moves higher on the UST yield curve, with the 10y yield sitting at 1.1290% at the highest level since March and lending support to what has been a struggling USD in the past month. Commodity markets are looking worse for wear, with Iron Ore and Copper down on the session as the latter saw the biggest losses down 3.5%. WTI crude and Gold both largely unchanged on the session, with investors sitting on their hands as political risks remain the driver to start the week.

The Day Ahead

 

Data

 

> JP November Current Account : 2.00T exp.

> UK MPC Member Broadbent to speak

> US FOMC Member Brainard to speak

> US November JOLTS Job Openings : 6.42M exp.

 

The focus seems to be back on the US and the new discussions around impeachment of the US President with eight days left in office, the commentary shows that the final week of the Presidency may be very rocky as negative risks came to the forefront. Momentum seems to be building for a further selloff in risk to start to the week, with equities and the Dollar in clear focus as the market drivers.

 

Range for the day : 0.7650 – 0.7730

 

AUD/USD Technicals

 

The 200ExpMA at 0.7722 is the level we are watching in early trade, offering some resistance on a move higher on a pullback in the USD. Overnight’s low of 0.7668 may offer a touch of support, however it is more likely that the 21DMA at 0.7625 still remains the target on moves lower. The 0.7800 handle will be the key obstacle on rallies, although looking like the USD is regaining some of its haven appeal amidst political tensions.