Oct 10, 2022
VOT Research Desk

Key News – Insights and Analysis

The Market Perspective:

The new week begins with AUD/USD falling to its lowest level in more than two years.

The USD is still rising and under pressure from aggressive Fed rate rise wagers.

The risk-off atmosphere and RBA’s dovish stance both discourage flows from the risk-sensitive Australian dollar.

The AUD/USD pair maintains its strong selling pressure on Monday after extending last week’s post-NFP bearish breakdown momentum through the 0.6400 level. Spot prices drop throughout the first part of the European day and continue to decline below the round number, reaching their lowest point since April 2020 in the final hour.

On the first day of a new week, US dollar purchasing is still going strong, which is seen as heavily pressuring the AUD/USD pair downward. In fact, a number of factors continue to boost the USD Index, which tracks the performance of the dollar versus a basket of currencies, as it rises to a one-and-a-half-week high.

The strong US monthly employment figures reported on Friday demonstrated the economy’s resiliency and gave the Fed room to continue raising interest rates quicker in order to fight inflation. In fact, the markets have over 80% odds against the Fed raising rates by another supersized 75 basis points for the fourth consecutive meeting in November.

As a result, US Treasury bond yields increased, which benefits the safe-haven greenback combined with the current risk-off atmosphere. The market’s mood is still precarious amid mounting concerns about a deeper global economic slowdown, a further escalation of the conflict between Russia and Ukraine, and resurgent US-China trade tensions.

The Reserve Bank of Australia (RBA), on the other hand, is undermining the Australian currency by delaying the pace of tightening policies and sending a dovish signal last week. This in turn strengthens the likelihood of further losses, while a slightly oversold RSI (14) on the daily chart cautions bearish traders.

Additionally, it is wise to wait for some consolidation or a moderate rally before positioning for an extension of the downturn due to the low trading volumes, which coincide with the US bank holiday in commemoration of Columbus Day. However, the fundamental environment suggests that the downside is where the AUD/USD pair will encounter the least amount of resistance.

Technical Levels to observe

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