A dovish RBA meeting and stronger US dollar ahead of a key US inflation report has kept AUD/USD pinned to a key support level. And odds of it making a meaningful this week recovery appear low, without a surprise downside miss from US CPI. Which again, seems unlikely.
By : Matt Simpson, Market Analyst
90% of economists are backing a 25bp Fed cut next week and for them to pause in January, according to a Reuters poll. This is similar to market pricing, with Fed fund futures implying an 86.1% chance of a cut next week and 90.4% chance of a pause at their following meeting.
The same poll estimates the Fed funds to fall to 3.5% to 3.75% or lower by the end of 2025, which leaves room for a minimum of 100bp of cuts (three cuts next year to follow one this month).
The RBA held rates at 4.35% as expected, tipped their hat to “weak growth”, noted lower “upside risks to inflation” and removed a key part of their statement hinting at a potential hike. By effectively removing their hawkish bias from the statement, the door has now been opened for the cut markets have been pricing in.
Governor bullock hit the wires after the meeting to say that while upside inflation risks have eased, they have not gone away. Regardless, RBA cash rate futures maintained their convictions of three cuts to arrive next year, having fully priced in a 25bp cut in April, July and December.
View my take on RBA statement in yesterday’s video: The RBA just made a small (but big) change to their statement
Click the website link below to get our Guide to central banks and interest rates in Q4 2024.
forex.com
See the expectations for the Fed, ECB, and BOJ...and more importantly, what could drive monetary policy in Q4 and beyond!
Wall Street indices continued lower on Tuesday ahead of a key US inflation report later today. The S&P 500 and Nasdaq were down for a second day while the Dow Jones tallied up its fourth bearish day. It is plausible to think that traders are taking a breather after pushing indices to record highs, knowing that if Santa’s rally is to play out this year it tends to come in the second half of the month. The weak performance of Wall Street also weighed on ASX 200 futures which are now -2% off the record high, after last week’s soft GDP figures weighed on local sentiment.
USD/JPY reached my 152 target outlined in yesterday’s report and shows the potential to extend its gains should US inflation come in slightly hot. USD/CAD briefly touched a 4-year and 8-month high ahead of the BOC meeting. USD/CHF bounced off the August high and invalidated the head and shoulders top, which I suggested could happen last week. And it shows further upside potential over the near term.
The consensus is for the Bank of Canada to cut rates by 50bp to 3.25% but signal a slower pace of easing next year. This makes sense, as it allows them to get said cuts out of the way and reassess as the political landscape and inevitable trade tug-o-war develops next year with Trump.
US inflation is the main event, although forecasts are a tad uninspiring with core CPI expected to remain steady at 2.7% y/y and 0.3% m/m. But anything higher could further support the USD, raise the odds of a December pause for the Fed and potentially see AUD/USD break key support.
Click the website link below to get our exclusive Guide to AUD/USD trading in Q4 2024.
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If the RBA is able to stick to its plan and keep monetary policy unchanged, AUD/USD may stick to its bullish seasonal trend in Q4, though volatility could increase.
At current levels, AUD/USD is trying to form an inverted hammer at a key support level (2022 trendline). But it seems unlikely we’ll close the week at this level with US Inflation data pending. We’re therefor on guard for a breakdown or bounce from current levels.
The best bet the Aussie has for a rally appears to be in the hands of a weak US inflation report, which seems unlikely.
The 1-hour chart shows the swift reversal lower from Tuesday’s high. A false break of the 2022 trendline shows a slight hesitancy to roll over for now and raises the potential for a minor bounce in today’s Asian session. But given the daily bearish trend and potential for a stronger US dollar and weaker yuan (which AUD shares a strong correlation with), I suspect any such bounce will be seen as a gift for bears who are eyeing a move towards 63c.
Note the lower weekly implied volatility sits neat 63c, with a historical VPOC also close by for potential support.
View the full economic calendar
– Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
forex.com
A dovish RBA meeting and stronger US dollar ahead of a key US inflation report has kept AUD/USD pinned to a key support level. And odds of it making a meaningful recovery this week appear low, without a surprise downside miss from US CPI. Which...
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
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By : Matt Simpson, Market Analyst
Fed to pause in Jan?
90% of economists are backing a 25bp Fed cut next week and for them to pause in January, according to a Reuters poll. This is similar to market pricing, with Fed fund futures implying an 86.1% chance of a cut next week and 90.4% chance of a pause at their following meeting.
The same poll estimates the Fed funds to fall to 3.5% to 3.75% or lower by the end of 2025, which leaves room for a minimum of 100bp of cuts (three cuts next year to follow one this month).
RBA open the door to cuts
The RBA held rates at 4.35% as expected, tipped their hat to “weak growth”, noted lower “upside risks to inflation” and removed a key part of their statement hinting at a potential hike. By effectively removing their hawkish bias from the statement, the door has now been opened for the cut markets have been pricing in.
Governor bullock hit the wires after the meeting to say that while upside inflation risks have eased, they have not gone away. Regardless, RBA cash rate futures maintained their convictions of three cuts to arrive next year, having fully priced in a 25bp cut in April, July and December.
View my take on RBA statement in yesterday’s video: The RBA just made a small (but big) change to their statement
Click the website link below to get our Guide to central banks and interest rates in Q4 2024.
Central Banks Q4 2024 Market Outlook - FOREX.com US
See the expectations for the Fed, ECB, and BOJ...and more importantly, what could drive monetary policy in Q4 and beyond!
Wall Street indices continued lower on Tuesday ahead of a key US inflation report later today. The S&P 500 and Nasdaq were down for a second day while the Dow Jones tallied up its fourth bearish day. It is plausible to think that traders are taking a breather after pushing indices to record highs, knowing that if Santa’s rally is to play out this year it tends to come in the second half of the month. The weak performance of Wall Street also weighed on ASX 200 futures which are now -2% off the record high, after last week’s soft GDP figures weighed on local sentiment.
USD/JPY reached my 152 target outlined in yesterday’s report and shows the potential to extend its gains should US inflation come in slightly hot. USD/CAD briefly touched a 4-year and 8-month high ahead of the BOC meeting. USD/CHF bounced off the August high and invalidated the head and shoulders top, which I suggested could happen last week. And it shows further upside potential over the near term.
Economic events in focus (AEDT)
The consensus is for the Bank of Canada to cut rates by 50bp to 3.25% but signal a slower pace of easing next year. This makes sense, as it allows them to get said cuts out of the way and reassess as the political landscape and inevitable trade tug-o-war develops next year with Trump.
US inflation is the main event, although forecasts are a tad uninspiring with core CPI expected to remain steady at 2.7% y/y and 0.3% m/m. But anything higher could further support the USD, raise the odds of a December pause for the Fed and potentially see AUD/USD break key support.
- 10:50 – JP PPI
- 12:30 – RBA chart pack
- 21:00 – OPEC monthly report
- 00:30 – US core CPI
- 01:45 – BOC interest rate decision (-50bp cut expected)
Click the website link below to get our exclusive Guide to AUD/USD trading in Q4 2024.
AUD USD Q4 2024 Market Outlook - FOREX.com US
If the RBA is able to stick to its plan and keep monetary policy unchanged, AUD/USD may stick to its bullish seasonal trend in Q4, though volatility could increase.
AUD/USD technical analysis:
At current levels, AUD/USD is trying to form an inverted hammer at a key support level (2022 trendline). But it seems unlikely we’ll close the week at this level with US Inflation data pending. We’re therefor on guard for a breakdown or bounce from current levels.
The best bet the Aussie has for a rally appears to be in the hands of a weak US inflation report, which seems unlikely.
The 1-hour chart shows the swift reversal lower from Tuesday’s high. A false break of the 2022 trendline shows a slight hesitancy to roll over for now and raises the potential for a minor bounce in today’s Asian session. But given the daily bearish trend and potential for a stronger US dollar and weaker yuan (which AUD shares a strong correlation with), I suspect any such bounce will be seen as a gift for bears who are eyeing a move towards 63c.
Note the lower weekly implied volatility sits neat 63c, with a historical VPOC also close by for potential support.
View the full economic calendar
– Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
AUD/USD clings to key trendline heading into US inflation
A dovish RBA meeting and stronger US dollar ahead of a key US inflation report has kept AUD/USD pinned to a key support level. And odds of it making a meaningful recovery this week appear low, without a surprise downside miss from US CPI. Which...
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
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