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Global Market Update
The View from Australia

by Craig Killaby | October 4, 2021



> AU September MI Inflation Gauge : 0.3% v. 0.0% prev.

> EU September Spanish Unemployment Change : -76.1K v. -82.6K prev.

> US August Factory Orders : 1.2% v. 1.1% exp.


Overnight Headlines (BBG)

> NZ extended their lockdown in Auckland although easing some restrictions, as PM Ardern acknowledged the immense difficulty in having a COVID zero approach

> Debt ceiling debates continue, with the GOP holding firm as the October 18th deadline for the limit to be breached approaches quickly

> OPEC has decided to keep production at current levels, seeing the price of oil spike as WTI crude is up over 2% on the session

What you need to know

In a slow start to the week due to thin holiday trading conditions, the AUDUSD was able to drift higher throughout the day and breach the elusive 0.7300 handle as the Dollar pared recent gains. As the EOM/EOQ flows started to unwind, so has the Dollar’s strength as the debt ceiling risks start to weigh on the Buck as we fast approach the dry-up date of the 18th October. With nothing from China or AU, the focus was on NZ as they extended their lockdown in Auckland and put other parts of the country into lockdown. The rise in cases only days before the RBNZ’s projected hike looks very familiar, and raises questions yet again as to what tomorrow’s meeting will entail.


FX market moves relatively muted in Asia, although the Dollar opens up sub 94.00 on the DXY as most of the majors gained against the Buck. Concerns spiked as Evergrande’s property arm halted trading mid-session in HK, although nothing major as yet. The inflation narrative has started to pick up yet again, with equity markets feeling the brunt of the move as tech performed poorly as the NASDAQ dropped while the S&P500 is 1.3% lower as I write heading into the US market close. Local markets were buoyant on the thin trading, with the ASX up 1.3% as the reopening inches closer as the vaccination target is within NSW’s grasps. A new Premier is likely in the coming days, with NSW Treasurer Perrottet the likely new leader. The potential for a more aggressive re-opening cannot be ignored under Perrottet, with a pro-business focus potentially boosting sentiment further. The AUDUSD is looking poised to take a run at 0.7300 yet again today, as surging commodity prices buoy the local currency. OPEC has kept production on hold despite the increased demand, seeing prices rise on both Brent and WTI oil. Iron ore the laggard in the commodities space, down over 3% while Copper and Gold rose in thin trading.


The Day Ahead




> NZ September ANZ Commodity Prices : -1.6% prev.

> AU September ANZ Job Advertisements : -2.5% prev.

> AU August Retail Sales : -1.7% exp.

> AU August Trade Balance : 10.10Bio exp.

> AU RBA Rate Statement : 0.10% exp.

> US September ISM Services PMI : 59.9 exp.

> EU ECB President Lagarde to speak

> US FOMC Member Quarles to speak

> CN Bank Holiday


The focus is on-shore today, as retail and trade data from AU hits the wires this morning ahead of the RBA’s statement this afternoon. FX traders seem to be looking past the RBA today, with very little expected from the statement. The data is also likely to wash over markets, as the headlines out of the US and the Dollar seem to be the drivers for the time being as the risks ramp up. Expecting 0.7300 to be taken, approaching key MAs on the topside.


Range Today : 0.7250 – 0.7325


AUD/USD Technicals


The momentum seems to be turning bullish for the pair, with 0.7317 (55DMA) the target as the Dollar hoarding seems to be subsiding for the time being. A strong bout of risk aversion would be a problem for bulls, with the debt ceiling debate the likely cause in the next couple of weeks. The 0.7170 level is the target on a move lower, with the intraday low of 0.7252 holding up the pair as volume remains light.

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