Dollar Takes Respite Before the Fed
The RBA announced that it abandons yield curve control atthe meeting on Tuesday in light of significant inflation improvements. The newshowever failed to bolster hawkish AUD bets, as at the same time the RBA issued quitea disappointing rate hike outlook. According to the head of the RBA Lowe, it’spossible that first rate hike may be delayed to 2024. Long-dated AUD bondyields accelerated decline on this wording with AUDUSD retreating as well. Onthe technical chart for the pair, we can see two leading price channels -short-term and medium-term, while the area from which the pair was sold offtoday was an intersection of the two upper boundaries of the channels:
AUDUSD poised to downside correction towards the centerline of the short-term uptrend (0.74-0.7350), which may be supported by thestrengthening of the dollar after the Fed and possibly the NFP on Friday.
The dollar started the week on weaker footing, losing itsadvantage above 94 points on the dollar index (DXY). The technical pictureshows a rebound from the lower border of the uptrend on Friday, which mayindicate the completion of the bearish correction after the double top at94.50:
Risk demand was supported yesterday by the news that OPECincreased production in October by half as much as planned. US ISMmanufacturing data showed that the sector increased hiring, input prices rose tomore extreme levels while new orders fell in October compared to September. Themain takeaway from the data is that supply shocks continued to push inflationhigher. At least this is true for the US manufacturing sector.
The calendar of events in America today is notparticularly interesting and a wait and see attitude will probably prevail intrading before the Fed meeting, while the volatility in the main pairs islikely to subside. There is a small risk that news from Glasgow, where the 26thUN climate change conference is taking place, could cause a negative reactionfrom oil, however, the main attention of market participants is concentrated onthe meeting of central banks this week.
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