The AUD/USD pair is in full decline, trading at 0.7018, its weakest since November 2020, and was set to close the week there. The US currency rose on risk aversion and expectations of additional US tightening.
A crisis always makes investors flee to the Dollar. Uncertainty has reigned supreme in recent days following the discovery of a novel coronavirus variant in South Africa on Nov. 25.
Markets were worried the new variation would slow the already sluggish economic recovery while also increasing supply chain concerns, a major cause of global inflation.
But there is little knowledge about it. Omicron is more infectious but less lethal. It is also unknown if existing immunizations are useful against it.
Several countries assume the variation was circulating locally before it was disclosed. In general, officials are concluding that travel restrictions are ineffective in fighting the virus.
Powell Is Done, And The RBA Is Up Next
On Wednesday, Jerome Powell and Janet Yellen spoke about the CARES legislation in front of a Senate select committee.
An increase in the risk of sustained inflation has been acknowledged by Powell. He noted that the Fed might examine stepping up tapering in December to combat inflation. Yellen said the Omicron coronavirus strain might offer “significant” harm to the world economy.
Wall Street fell, but it recovered before the weekly close. Also, 10-year Treasury rates stayed below 1.50%.
The AUD/USD pair fell with the US markets but disregarded their rise. Gold prices fell to approximately $1,770 an ounce after failing to recover from the 1,800 mark.
Financial markets overlooked the missing US jobs data. Job creation in November was 210K, far less than the 550K predicted.
With an unemployment rate of 4.2%, the rate of participation increased to 61.8. The November ISM Manufacturing PMI was 61.1, while the services PMI was 61.9.
The Australian statistics were uneven, indicating both the economic crisis and the gradual end of lockdowns. Building permits fell 12.9% MoM in October, despite Q3 GDP falling 1.9% QoQ, less than the -2.7% predicted.
The week will begin with the release of the November TD Securities Inflation. As of now, the Reserve Bank of Australia has ruled out raising interest rates before 2024 due to increasing inflation.
This week’s report may have cooled speculation, but the RBA will meet on Tuesday.
The US will release the November Consumer Price Index, which is projected to be adjusted down from 6.2% to 5.8% YoY.
Outlook For AUD/USD
AUD/USD CHART Source: Tradingview.com
The AUD/USD duo is down for the sixth week in a row. According to the weekly chart, the 20 SMA has slipped underneath the 100 and 200 SMAs, both of which are at 0.7190. Conversely, chart patterns continue to trend lower, with the RSI reaching oversold levels.
The cross is oversold on the daily chart, but the chart patterns are still strongly negative. Moreover, the pair is trading below a bearish 20 SMA, which is nearly 200 pips higher.
0.7000 provides quick support, followed by 0.6960. A breach below the latter reveals 0.6900. Sellers are currently positioned around 0.7100 and 0.7140.