AUD/USD bears in control on dovish and bearish biases, targetting key Fibo level
- AUD/USD fails to garner demand on the back of less pessimistic trade war headlines.
- RBA sentiment remains dovish in the markets.
- AUD/USD slides towards a critical Fib target area.
AUD/USD is currently trading at 0.6787 and oscillates between a range of 0.6785 and 0.6814 on the day so far. Trade wars and the RBA are the main themes, while from a technical standpoint, AUD/USD has been respecting the descending 200-hour moving average's resistance and is trading back down below the 21-hour moving average, en-route to test a key Fibonacci retracement level.
RBA themes
From a fundamental point of view, the Reserve Bank of Australia's dovish stance is factored into the price and, "markets are pricing a 25% chance of easing at the December RBA meeting, and a terminal rate of 0.46% (RBA cash rate currently at 0.75%)," according to analysts at Westpac.
A growth rebound is likely a long way off and considering the latest RBA minutes where a November cut was actively discussed. If global/domestic economic developments nor geopolitical events December don't force the hand of the RBA, then another rate cut at the RBA’s next forecast update in February 2020 could be on the cards – "The Board noted the long and variable lags in the effects of monetary policy and wanted to wait for a full assessment. In our view, this points to another rate cut at the RBA’s next forecast update in February 2020," analysts at ANZ Bank argued.
US-China themes
AUD/USD trades as a proxy to what goes down in 'China Town'. Meaning, AUD is closely correlated to events related to Chinese economic and political events and headlines. Currently, the market's main focus is on the Sino/US trade war.
On Thursday, there was a mild risk-on tone to markets due to positive US-China headlines stemming from both a Wall Street Journal (WSJ) article and the South China Morning Post (SCMP) reporting on the mater – The WSJ stated that China’s top trade negotiator invited his US counterparts to a new round of face-to-face talks. The SCMP wrote that the "US may be willing to delay the 15 December tariffs if an agreement is not reached by then," but, as analysts at ANZ Bank argued, "it’s fair to say that some signs of trade-headline fatigue are emerging in markets." Overall, neither of these articles were sufficient enough to prevent equities nor the Aussie from sliding.
AUD/USD levels
AUD/USD remains capped below the 200-hour moving average's resistance and slid back below the 21-hour moving average. Bears are currently en-route to test a key Fibonacci retracement level.