Market news

26 November 2021

AUD/USD pauses at three-month low under 0.7200 on strong Aussie Retail Sales

  • AUD/USD stays pressured at the lowest levels since August, recently bouncing off intraday low.
  • Preliminary reading of Australia Retail Sales jumped past 2.5% forecast, 1.3% prior in October.
  • Virus woes, Fed rate hike concerns weigh on market sentiment.
  • US open, risk catalysts will be in the spotlight amid a light calendar.

AUD/USD bounces off intraday low, also the lowest levels since August 23, as strong Australia Retail Sales figures battle risk-off mood during early Friday. That said, the Aussie pair picks up bids near 0.7175 to consolidate intraday loss of 0.20% by the press time.

Australia Retail Sales crossed 2.5% market consensus and 1.3% prior reading in October to jump with a 4.5% YoY print.

Read: Aussie Retail Sales big beat fends off the bears in AUD/USD

As the Reserve Bank of Australia (RBA) has already shown its intent to “wait and watch” before announcing the rate hike details, the AUD/USD traders are less impressed with the data despite showing an immediate bounce from a multi-day low. The reason could be linked to the sour sentiment that weighs on the quote due to the pair’s risk barometer status.

That said, the risk-off mood could be linked to the fresh coronavirus woes, mainly emanating from the Eurozone, as well as escalating fears of a Fed rate hike at the wrong time. At home, Australia’s daily covid cases rise to the highest levels since October 29, per ABC News.

While Poland, Germany and France struggle to defend their “no national lockdown” concerns, chatters of a faster spreading virus variant add to the risk-off mood.

On the other hand, the latest FOMC Minutes and the Fedspeak have been hawkish enough to keep the Fed rate hike concerns on the table. Also, challenging the sentiment is the 30-year high print of the Fed’s preferred inflation gauge, namely the Core PCE Price Index for October.

Against this backdrop, the US 10-year Treasury yields drop 5.5 basis points (bps) to 1.589%, extending Wednesday’s pullback from monthly peak after a day off due to the US Thanksgiving Day holiday. Additionally portraying the risk aversion are the downbeat prints of the S&P 500 Futures and Australia’s benchmark equity index, ASX 200.

Having witnessed initial reaction to the Aussie data, AUD/USD traders may rely on the qualitative factors to determine near-term market moves. Among them, Fed, coronavirus and US-China chatters will gain major attention.

Technical analysis

Given the sustained trading below a three-month-old support line, now resistance around 0.7260, as well as downbeat MACD signals and a bear cross of the 20-DMA to 100-DMA, AUD/USD sellers remain hopeful to test the yearly bottom of 0.7105. However, oversold RSI conditions may challenge the sellers around an ascending support line from November 2020, around 0.7145. Meanwhile, corrective pullback remains elusive below the previous support line from August 20, near 0.7260.

 

Market Focus

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