Australian Dollar, AUD/USD, RBA, Hong Kong GDP – Talking Points
Tuesday’s Asia-Pacific Outlook
The risk-sensitive Australian Dollar fell versus the US Dollar despite US stocks climbing overnight. The high-beta Nasdaq-100 staged an impressive 1.72% rally to kick off the May trading month following a 5.62% drop in April. Bond traders continued to ditch Treasuries ahead of this week’s Federal Reserve interest rate decision, pushing the benchmark 10-year yield above 3% for the first time since 2018. That likely helped fuel the US Dollar’s fundamental backing.
Today, Asia-Pacific traders are preparing for a rate decision from the Reserve Bank of Australia (RBA). Cash rate futures are pricing in a little less than a 50% chance for a 10-basis point hike today, and analysts seem split over today’s decision. However, that leaves AUD with a chance to rally if Governor Philip Lowe opts to kick off the bank’s rate-hiking cycle today.
New Zealand, this morning, adopted new fiscal rules that will increase government debt levels aimed at increasing infrastructure spending. The new rules set a surplus band of 0% to 2% of gross domestic product (GDP) and a ceiling of 30% of GDP, according to Finance Minister Grant Robertson. The additional slack will not be allowed for regular budgetary items, instead focusing on capital investment while keeping a balanced budget. NZD/USD was little changed on the news following an overnight drop to the lowest levels traded at since June 2020.
Hong Kong is set to release its first quarter gross domestic product (GDP) growth data this morning. Analysts expect to see a contraction of 1% on a year-over-year basis, according to a Bloomberg survey. The ongoing lockdowns across China and in Hong Kong itself through the January to March period likely weighed greatly on trade and consumer consumption. A sharp pullback in retail sales flashed a big warning sign for the Asian financial hub back in February. Still, growth is expected to pick back up later this year as Covid restrictions recede.
AUD/USD Technical Forecast
AUD/USD has been in freefall recently but prices may find some support at a trendline from October 2021 that has previously been supportive. The 0.7000 psychological level may also underpin prices. However, the 20-day Simple Moving Average recently crossed below the 50-day SMA, and it is on track to cross below its 200-day SMA as well. Meanwhile, the Relative Strength Index dropped below the 30 mark. For now, it looks like bears are still in control.
AUD/USD Daily Chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
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