Australian Dollar, AUD/USD, Omicron Variant, Q3 GDP Growth - Talking Points
- Fed chair signals possible accelerated tapering of balance sheet growth
- AUD/USD threatens August low in volatile overnight session
Wednesday's Asia-Pacific Forecast
The Australian Dollar is in focus for Wednesday's Asia-Pacific session after the country's third-quarter GDP beat expectations. Australia's Q3 GDP growth rate crossed the wires at -1.9% q/q, beating the consensus estimate of -2.7%. That dragged annual growth down to 3.9% from 9.6%. A series of Covid lockdowns from Victoria to New South Wales is responsible for the quarterly contraction, although growth is expected to rebound in the fourth quarter.
The risk-sensitive AUD/USD failed to move higher on the news. The Omicron strain still has investors worried as health experts rush to assess the new threat. US stocks sold off overnight, with the Dow Jones Industrial Average sinking 1.86%. Testimony before Congress from Federal Reserve Chair Jerome Powell amplified the weakness in stocks, with Mr. Powell stating that the central bank may have to accelerate its taper timeline.
Oil prices fell sharply overnight, with WTI falling more than 5%. Crude oil prices are now over 20% from the October swing high. The American Petroleum Institute (API) reported a draw of 747k barrels of oil for the week ending November 26. Oil was already trending lower before the new Covid strain headlines, but the possible hit to travel and tourism at a time when many Asian countries were just beginning to open saw prices move deeper into the red.
This morning saw Australia's Ai Group manufacturing index cross the wires at 54.8, up from 50.4 in October. Japan's third-quarter capital spending increased by 1.2% on a year-over-year basis. Today will also see South Korea report trade data for November. China's Caixin will report November PMI data later today. China's NBS reported the country's manufacturing sector expanded in November at 50.1 earlier in the week. The Caixin data focuses on smaller firms compared to the NBS survey.
AUD/USD Technical Forecast
AUD/USD saw a volatile overnight session, with prices briefly piercing below the August low. The intraday price action hit the lowest level since November 2020. The September low capped prices to the upside. The Relative Strength Index (RSI) crossed back into oversold territory, which highlights the strong weakness in the currency pair over the last several week. Prices may continue to gyrate between the August and September lows.
AUD/USD Daily Chart
Chart created with TradingView
--- Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter
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