Forex Trading Library

The Week Ahead – Safe haven alternatives

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AUDUSD falls as RBA might hold

The Australian dollar heads south as slowing inflation builds a case for an extended pause in rate hikes. Despite volatile energy costs, core inflation eased further in August, lessening the burden on the RBA to press for more tightening. The market widely expects the central bank to stay put for the fourth consecutive time this week. The uncertainty and a potential market mover are whether policymakers have one more hike under their sleeves before the end of the year or would be patient enough to kick the can down the road into next spring. 0.6280 is the next support and a hawkish outlook may send the aussie above 0.6650.

NZDUSD struggles on cautious sentiment

The New Zealand dollar inches lower on subdued risk sentiment. Growth has bounced back in the second quarter after it flat-lined in the first one. A surprisingly robust economy along with an uptick in two-year inflation expectations might give the RBNZ a mild headache, as it has been aiming for a technical recession to muffle inflation, and could cause rates to stay at their highest in over 14 years for an extended period of time. Externally, a downside risk factor is the economic deterioration in China, New Zealand’s largest trading partner. Reduced risk appetite could send the kiwi below 0.5860 with 0.6210 as a key resistance.

XAUUSD tumbles on high bond yields

Gold sank to a six-month low as the US dollar advanced due to the Fed’s hawkish hold. One might ask why a series of uncertainties from China’s economy to rising energy prices has not popped up demand for the traditional safe haven metal. Truth is Treasury yields offering a virtually risk-free return of 5% have become the sought-after substitute to the non-yielding metal. As traders bet on American exceptionalism thanks to rosier economic data in comparison to other developed economies, inflows into dollar assets mean fewer bids for bullion. The price is falling to March’s low of 1810 and 1940 is the closest resistance overhead.

NAS 100 awaits NFP catalyst

The Nasdaq 100 steadies as market participants put faith in a soft landing of the US economy. The recent surge in Treasury yields to a 16-year high was a reminder that uncertainties are still holding some investors back, putting equity markets under pressure. From US-China trade tensions to data guesstimates, the bulls may find it hard to push forward. The upcoming nonfarm payrolls could be a strong catalyst as a tight labour market has been a thorny issue for the Fed. A slowdown in job addition or an uptick in the unemployment rate could put policymakers at ease and send the tech index towards 15900 with 14250 as a fresh support.

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