AUD: AUD/USD - Treads Water Around 0.6550, Ignores Risk-Off For Now
The AUD/USD has had a range today of 0.6531 - 0.6557 in the Asia- Pac session, it is currently trading around 0.6545, -0.10%. The AUD/USD has had a subdued session considering the risk-off start to the week. Asia has broadly sold the USD as USD/JPY trades lower, but if this risk-off start to the week turns into something more I would look for the USD to potentially bounce against risk currencies. The AUD is consolidating around 0.6550 just below the pivot toward 0.6550-60 within its wider 0.6350-0.6700 range. On the day, I would not be surprised to see the AUD/USD drift back toward the 0.6490-0.6510 area on the back of this shaky start to the week.
- MNI POLICY: RBA Sees Balanced Risk, Despite Monthly CPI Shock. The Reserve Bank of Australia continues to view the 3.6% cash rate as somewhat restrictive, despite recent strong inflation data, including October’s monthly print, which policymakers will largely look through, MNI understands.
- MNI AU - Wages Bill Continues Rising, Q3 Inventories Flat: Q3 Australian company profits were weaker than expected posting a flat outcome on the quarter after Q2’s sharp fall of 2.6% q/q and are now up only 1.1% y/y (strongest since Q1 2023 though). Inventory volumes fell 0.9% q/q which is likely to be a small detraction from Q3 GDP growth currently expected to rise 0.7% q/q and released on Wednesday. The net export and public demand contributions are released Tuesday.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6400(AUD445m), 0.6425(AUD444m), 0.6550(AUD521m). Upcoming Close Strikes : 0.6490(AUD710m Dec 4) - BBG
- The AUD/USD Average True Range for the last 10 Trading days: 39 Points
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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AUSSIE 10-YEAR TECHS: (Z5) Returns Lower
- RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
- RES 2: 95.960 - High Apr 7 (cont.)
- RES 1: 95.900 - High Oct 17
- PRICE: 95.670 @ 16:16 GMT Oct 31
- SUP 1: 95.510 - Low Sep 3
- SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 3: 95.275 - Low Nov 14 (cont) and a key support
Aussie 10-yr futures slipped lower Wednesday on the back of hotter-than-expected Australian inflation. This returned prices lower despite nascent signs of a technical recovery as recently as last week. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg.
AUSSIE 3-YEAR TECHS: (Z5) Struck by Strong CPI
- RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
- RES 2: 96.780 - High Jun 26 (cont)
- RES 1: 96.700 - High Sep 12
- PRICE: 96.375 @ 16:13 GMT Oct 31
- SUP 1: 96.280 - Low May 15 (cont.)
- SUP 2: 95.900 - Low Jan 14 (cont.)
- SUP 3: 95.760 - Low 14 Nov ‘24
Having bounced well on the back of the mild US CPI print, Aussie 3-yr futures reversed course Wednesday on strong domestic inflation data containing RBA cut pricing through 2026. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support.
FED: Gov Waller: Still Advocating For A December Rate Cut
Gov Waller, one of the FOMC's more prominent doves, makes clear in an appearance on Fox Business that he supports a follow-up rate cut in December. He makes reference to Chair Powell's press conference comment that the Fed could skip a cut at the December meeting due in part to a lack of official government data during the federal shutdown (Powell: “what do you do if you are driving in the fog? You slow down").
- Waller says today: "Right now, we know that the labor market has been weak... We know inflation is going to come back down. Inflation expectations are anchored, and in that world, the standard of central bank wisdom is to look through it and proceed with worrying about the labor market. So in my view, we should just look at what the data is telling us and proceed on policy that way.... So this is why I'm still advocating that we cut policy rates in December, because that's what all the data is telling me to do. The fog might tell you to slow down. It doesn't tell you to pull over to the side of the road. You still have to go. You may want to be careful, but it doesn't mean to stop, and ... the right thing to do with policy is to continue cutting."
- This is of particular interest since he appeared to suggest he would have a more cautious outlook on further easing after cutting in October.
