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Global Market Update
The View from Australia

by Craig Killaby | November 22, 2021



> EU November Consumer Confidence : -7 v. -5 exp.

> US October Existing Home Sales : 6.34Mio v. 6.20Mio exp.


Overnight Headlines (BBG)

> Current Fed Chair Jerome Powell has officially been nominated for a second four-year term, while his competition for the role Lael Brainard has been named as the Vice-Chair

> Oil markets have been choppy, as reports swirl that the US plans to release their reserves in a co-ordinated effort to ease price pressures and ramping up tensions with OPEC+

What you need to know

It was a dull start to the trading week in Asia, with little data to move markets the price action in most FX pairs was muted. The movement started to pick up in the latter portion of the session, with commodity backed pairs seeming to pare the losses seen last Friday, and the AUDUSD was able to break above the 0.7250 mark in early London. Consumer confidence in Europe is being weighed down by the COVID resurgence, as caseloads start to increase heading into the colder months as investors start to worry about the re-implementation of widespread lockdowns after they have been put in place in both Austria and the Netherlands. EURUSD continues to struggle amidst the surge, with the pair down another 0.6% from the opening prices and looking heavy as we open up here in Sydney this morning.


The story overnight was the nomination of the current Fed Chair Powell for an additional term, while Lael Brainard has been named the Vice-Chair replacing the outgoing Clarida. Market reaction was a bounce in risk appetite, primarily led by the move higher in equity markets with the S&P500 up 0.4% as I write this morning. UST yields also rose across the curve, as investors start to price in a full 0.25% rate hike in June 2022. The announcement allows for Biden to tout continuity in the management of the Federal Reserve, as they embark on one of their most delicate and pivotal times in history as they attempt to unwind the unprecedented stimulus employed due to the COVID19 pandemic.


In FX, the dollar broke to 14 month highs in DXY dollar index terms, up another 0.5% on the day. Risk sensitive pairs unable to hold on to gains into the tail end of the session, with the AUDUSD down 0.2% and looking heavy heading into the local session. NZDUSD also looking weak, down 0.8%, despite the expectations of a RBNZ hike tomorrow, with some analysts forecasting a 0.5% move. Mixed bag on the commodities front, with Gold the laggard down over 2% as the rates move was fierce with both the 2y and 10y UST yield up near 6.5bps. WTI crude looks poised for some volatility, as reports are surfacing that US President Biden may be planning on a co-ordinated release of their reserves along with other countries in an effort to ease price increases. In metals, copper is down 0.4% on the day while iron ore bucked the trend up 5.5%.


The Day Ahead




> NZ Q3 Core Retail Sales & H/line Retail Sales : -7.6% & -10.2% exp.

> AU November Flash Manufacturing & Services PMI : 58.2 & 51.8 prev.

> EU November German Flash Manufacturing & Services PMI : 57.0 & 51.4 exp.

> EU November Flash Manufacturing & Services PMI : 57.5 & 53.6 exp.

> UK November Flash Manufacturing & Services PMI : 57.2 & 58.6 exp.

> US November Flash Manufacturing & Services PMI : 59.3 & 59.1 exp.

> JP Bank Holiday – Labour Thanksgiving Day


It should be an interesting day, as investors can now start looking ahead to the upcoming FOMC meeting with the Fed Chair decision off the table. US yields will be in focus, although with Japan off on holidays today the movement in Asia is likely to be limited. The dollar looks strong, although the question remains as to whether this is the start of a breakout or whether the top is in.


Local data will be released first up, with the NZ retail sales figures and AU flash PMIs the only data in Asia. PMIs from Europe will likely cause some jitters if we see some downside prints, while strong figures out of the US may put further pressure on the Fed to act. Interesting sessions ahead to finish out what is a busy holiday week for the US ahead of Thanksgiving on Friday.


Range Today : 0.7190 – 0.7250


AUD/USD Technicals


Opening up this morning hovering around the recent lows, with the 0.7170 level the target on a break of 0.7220. Momentum is quite clearly to the downside, and the recent call of a 0.7200 still remains in tact as the bull run in the dollar remains the theme. As the pair is right on support around 0.7225, holding the line will be the key, with a potential for a bounce toward 0.7200-middle on the table.

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