Market News & Analysis


Top Story

AUD/USD may be Ready It’s Next Move!

The RBA meets tomorrow.  It should be a quiet event for the markets, with the Committee remaining dovish.  At their last meeting in April, they left rates unchanged after lowering them to near 0% while maintaining QE, in line with other major global central banks.  Therefore, traders will be more interested in how well the Committee perceives QE to be helping stimulate the economy and their projections moving forward.  On April 21st,  RBA Governor Lowe said he expected the unemployment rate to be around 10% by June.  In addition to the RBA meeting on Tuesday, the Bank will release the RBA Statement on Monetary Policy on Friday.

If the RBA continues their dovish stance tomorrow,  the Australian Dollar is at an ideal spot to move lower. As we had discussed last week, the AUD/USD has a strong correlation with the S&P 500.  And with the S&P 500 moving lower into the end of last week, it shouldn’t be much of a surprise that the pair moved lower on Thursday and Friday as well.  Notice how the S&P 500 (green line below) and the AUD/USD have been moving together since late February!

Source:  Tradingview, City Index

There are a few other tings the two assets have in common.  Both bottomed in mid-March within days of each other. They both formed an ascending wedge off the lows, and both retraced to the 61.8% Fibonacci retracement level from the February highs to the March lows (with the Aussie having a false breakout above).  They both held horizontal resistance at their highs on Thursday.  Currently, they both broke lower out of the ascending wedge.  The target for an ascending wedge formation ins 100% retracement of the wedge.  That would target the March lows for both the S&P 500 and AUD/USD. 

If the RBA remains dovish and if stocks continue to move lower, AUD/USD may head lower as well.  There is a good deal of resistance above in both the S&P 500 and AUD/USD.  Since the two assets are so correlated, don’t be surprised if the two start moving lower together, possibly back towards their March lows!


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.