Forex Stability Prevails: Evergrande Impact Limited on AUD and CNH

The impact of Evergrande liquidation is limited, and AUD and CNH are steady. Focus on upcoming economic indicators and Federal Reserve decisions.

In a surprising turn of events, the recent court-ordered liquidation of Evergrande Group has failed to cast a shadow over market sentiment, with both the Australian dollar (AUD) and the Chinese yuan (CNH) maintaining stability.

Evergrande’s Limited Impact on Forex Market

Earlier today, a Hong Kong court issued a liquidation order for Evergrande Group, citing the failure to present a viable restructuring plan since its initial default in 2021. The decision led to a temporary share halt and a 20% drop in the Group’s share price. Despite these developments, the broader forex market seems largely unfazed, particularly evident in the resilience of the Australian dollar.

The USD/CNH pair continues to hover around the 200-day simple moving average, currently testing a confluence area formed by the 200 SMA and the late 2019 level of 7.1965. Despite expectations of a weakening US dollar in the coming year, short-term signals and robust fundamental data suggest potential short- to medium-term support. Notably, USD/CNH retraced some ground after strengthening in response to Chinese officials’ announcement of lowering banks’ reserve requirements to stimulate credit markets.

Forex Stability Prevails: Evergrande Impact Limited on AUD and CNH

Australian Dollar Faces Sideways Movement

Meanwhile, the Australian dollar has experienced minor fluctuations but remains consolidated. Previous concerns about China’s economic outlook had weighed on the Aussie, but it now appears content oscillating around the 200 SMA and the 0.6580 level. The MACD indicator hints at a potential slowdown in bearish momentum in the upcoming sessions. The support for the US dollar ahead of the Federal Open Market Committee (FOMC) meeting may limit further upside.

The key resistance for the AUD/USD pair is 0.6680, with support at 0.6460. Intraday levels linked to the highs and lows of the recent consolidation pattern (0.6621 and 0.6525) could act as potential triggers for false breakouts, pending new information from Jerome Powell and the Federal Reserve.

Upcoming Risk Events

Crucial economic events are on the horizon next week. Analysts anticipate a decline in Q4 Australian inflation and a continued contraction in Chinese manufacturing, with an expected PMI figure of 49.2.

However, the week’s highlight is undoubtedly the Federal Reserve’s interest rate decision and press conference. Strong US economic data will likely temper market expectations of aggressive rate cuts, downplaying the idea of an imminent cut. Furthermore, analysts anticipate that the non-farm payroll data on Friday will reveal the addition of 173,000 jobs in January. The Fed’s robust labor market remains a concern, signaling potential challenges in managing inflation expectations.

In summary, Evergrande’s liquidation may have caused financial problems. Still, the broader market seems poised to weather the storm, with the focus shifting to upcoming economic indicators and the Federal Reserve’s decisions.

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