Omicron volatility weighs on AUD ahead of trade data

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Australian Dollar, AUD / USD, Turkish Lira, AUD Trade Balance – Talking Points

  • Australian trade data in focus as volatility rises amid Covid fears
  • Turkish Lira hits new low against US dollar amid Turkey’s economic woes
  • AUD / USD breaks below critical support, 0.7000 on next table?

Thursday’s Asia-Pacific Forecast

The risk-sensitive Australian dollar fell overnight after the Omicron variant was found to have made landfall in the United States. The news put the markets in a risk averse position, with stocks falling on Wall Street and the safe haven US dollar gaining. Investors are on edge, as scientists are still assessing the threat posed by the new strain.

This uncertainty in the markets is expected to continue until more light is shed on the new variant of Covid. A wave of travel restrictions have been put in place by dozens of countries, a move that is sure to hurt South Africa’s economy. However, a broader concern about lockdowns is the driving force behind the current volatility. This is particularly damaging to sentiment, given that the end of the pandemic was seen as imminent.

Elsewhere, the Turkish lira fell to a new low against the US dollar before cutting losses after Turkey’s central bank said it would take action against unhealthy exchange rate moves. Cities across Turkey have seen protests this week against economic conditions provoked by President Erdogan’s highly unconventional economic policies.

Australia will see its October trade balance cross the line at 00:30 GMT. Analysts expect the country’s trade surplus to fall to A $ 11 billion from A $ 12.24 billion in September. A bullish impression could help stem the outflow of the Australian dollar, which has come under serious pressure in recent weeks. This weakness arises despite an impression of pink GDP earlier in the week. For now, it looks like broader sentiment remains the main driver of the AUD.

AUD / USD technical forecast

AUD / USD continues to hold on to August low, but it looks like the bears are starting to gain the upper hand. The currency pair comes out of a horrific November when prices fell more than 5%. If prices continue to fall, the psychological level of 0.7000 could offer the next major point of resistance. The relative strength index is in oversold territory, highlighting extreme weakness, although this does not mean that prices cannot continue to fall.

AUD / USD daily chart

Graphic created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

Contact Thomas, use the comments section below or @FxWestwater on Twitter

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