Wall Street, Australian Dollar, Westpac Consumer Confidence, AUD/USD - Talking Points
- Asia-Pacific markets face pressure after Wall Street losses
- Market eyes Australia’s Westpac Consumer Confidence
- AUD/USD faces psychological resistance as pair moves higher
Wednesday’s Asia-Pacific Outlook
Asia-Pacific markets may pull back from gains seen on Tuesday following a shaky session on wall Street. The S&P 500 index led losses among the major indexes, while the VIX “fear gauge” rose above the 20 handle. The 10-year benchmark Treasury yield saw mild buying, pushing the note’s yield down near a full percentage point.
The Australian Dollar may see movement on the Westpac Consumer Confidence Index for May, due out at 00:30 GMT. The prior month’s read crossed the wires at 118.8, the third consecutive monthly move higher. The Aussie Dollar may strengthen if the trend of improving consumer confidence continues. AUD/USD strengthened overnight following Tuesday’s Reserve Bank of Australia (RBA) Minutes.
Rising prices across the economy, especially in the commodities space, have helped cushion underlying fundamental strength for the Australian Dollar. Iron ore – one of Australia’s main exports – is extending gains from the previous session, with the industrial metal eyeing its recent high. Pandemic-fueled stimulus spending has helped push industrial metals to multi-year highs as governments focus on job-creating initiatives like infrastructure. China is perhaps the largest driver of imports.
However, the political tension between Australia and China throws a potential question mark into the commodity rally, with Beijing’s economic planning agency, the National Development and Reform Commission (NDRC), stating a need to diversify its supply chains for metals and other resources, according to Bloomberg news. Regardless, diversifying supply chains when it comes to industrial metals is no small task, and it will likely take China years, if not decades, to accomplish that goal to a meaningful degree.
Elsewhere, crude oil prices dropped as reports cross the wires that significant progress on the revival of the US – Iran nuclear deal may be announced shortly. The deal, which was nixed under former President Donald Trump’s term, would likely see Iran return in force to the global energy market, increasing supply and pressuring prices in turn.
AUD/USD Technical Breakdown
AUD/USD is facing a former area of resistance at the psychologically imposing 0.78 handle after moving higher overnight. A break above the level would see recent highs come into focus shortly thereafter. Alternatively, a move lower may see support at the 0.7750 level, with the 50-day Simple Moving Average sitting below the key level.
AUD/USD Daily Chart
Chart created with TradingView
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--- Written by Thomas Westwater, Analyst for DailyFX.com
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