AUD/USD Stuck in Range, Wall Street De-Risks, Asian Markets Brace for Losses. Economic Data Signals Growth Moderation.
Wall Street witnessed a further de-risking in overnight trading, with major indices posting declines. The DJIA was down 1.14%, the S&P 500 dropped 1.47%, and the Nasdaq fell 1.57%. This decline was primarily attributed to the absence of positive catalysts and ongoing risks, including elevated Treasury yields, rising oil prices, and a gridlock in the US government funding bill.
AUD/USD Stuck in a Range, Silver Eyes Retest
The VIX, a key measure of market volatility, reached its highest level since May 2023, reflecting prevailing risk-off sentiments. This aligns with seasonal patterns, hinting at a potential peak in early October. Meanwhile, the US dollar continued its ascent, rising by 0.2%, bolstered by slightly hawkish comments from Federal Reserve officials endorsing higher interest rates.
Disappointing figures in US new home sales and US consumer confidence pointed toward a slowdown in economic growth due to tighter policies. However, it’s important to note that concrete evidence of a recession has yet to materialize. US new home sales remain in line with pre-COVID levels, and consumer confidence has not exhibited the sharp decline typically seen before a recession.
Nasdaq 100 Faces Selling Pressure
The Nasdaq 100 index broke below an ascending channel pattern, reaching a new three-month low, signaling that sellers are in control. This decline followed the failure to defend the Ichimoku cloud support and its 100-day moving average last week. The following critical support level to watch is at 14,200, a vital protection level. Additionally, the weekly Relative Strength Index (RSI) is approaching the 50 level for the first time since March, presenting a significant test for buyers in maintaining the broader upward trend.
Asia Open – Asian Markets Brace for More Losses
Asian stock markets are poised for another negative session, with the Nikkei down 1.13%, ASX down 0.42%, and KOSPI down 0.50% at the time of writing. The Hang Seng Index hit a new nine-month low in the previous session, driven by increasing concerns about a potential liquidation of China Evergrande, discouraging investors.
China’s August industrial profits recorded a milder decline, but gains may remain subdued as the data still showed a year-on-year decrease, and risks in the property sector persist.
Australia’s Consumer Price Index (CPI) data for the morning met expectations at 5.2%. The absence of an upside surprise has anchored rate expectations for the Reserve Bank of Australia’s (RBA) upcoming meeting. However, uncertainty lingers regarding the need for an additional rate hike early next year. This uncertainty stems from the fact that the inflation data still indicates persistent upward pressure on prices, compared to the previous figure of 4.9%.
AUD/USD Stuck in Ranging Pattern
The AUD/USD currency pair has been trapped in a ranging pattern for the past month, with intermittent attempts to break above the 0.650 resistance level failing. Sellers appear to have the upper hand for now, with the daily RSI struggling to cross above the 50 level and a potential bearish crossover displayed on the Moving Average Convergence/Divergence (MACD) indicator. Lingering risks to China’s economic growth and the overall negative risk sentiment have prevented the bulls from gaining traction. Investors will closely monitor any breakout from this range, with the lower consolidation range at 0.636 and the upper resistance range at 0.650.