Is 70 the next stop for AUD?

Australian dollar hits 13-month low

It’s down, down, down for the Aussie, which continues to falter and has fallen into 70-territory. AUD/USD has touched a low of 0.7062 earlier today, its lowest level since early November 2020. This November has been a disaster for the currency, which has slumped by 5.70%. The Australian dollar could be headed below the 70 line, which has psychological significance.

Australia releases GDP for the third quarter on Tuesday, a key release which should be treated as a market-mover. The country endured a rough quarter, with extended lockdowns in Sydney and Melbourne hampering economic activity. The consensus stands at -2.7% q/q, but annualized growth is projected at +3.0%.

With the Omicron variant of Covid spreading fast and causing consternation in the financial markets, investors are all ears as Fed Chair Jerome Powell is testifying before a Senate committee. Powell said that Omicron was a risk that was not part of the Fed’s forecasts, and that the Fed would be in a better position to assess its impact in 10 days. Powell acknowledged that inflation risks have increased, and made an about-face, saying that inflation could no longer be labeled as ‘transitory’. He also said that the Fed would discuss speeding up tapering at the December meeting.

Powell’s comments appear to indicate a slight narrowing of the gap between the Fed’s view and market expectations. The markets expect an acceleration of tapering in January, with Goldman Sachs stating in a note last week that it expects a doubling of the trim, from USD 15 billion to 30 billion. The Fed is nowhere near the market pricing of three rate hikes in 2022, but if inflation remains red-hot, we can expect Powell to signal that the Fed is prepared to raise rates next year. The Fed appears to be moving in a hawkish direction, which bodes well for the US dollar.

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AUD/USD Technical

  • There are resistance lines at 0.7226 and 0.7331
  • AUD/USD is testing support at 0.7065. Below, there is support at 0.7009, which is protecting the symbolic 70 level

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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