| 3-Feb | AUD Trade Balance (DEC) (00:30 GMT; 19:30 EST) | House Price Index (YoY) (4Q) (00:30 GMT; 19:30 EST) |
| Expected: -2.0B | Expected: 11.8% | |
| Previous: -2.254B | Previous: 10.6% |
What Are The Markets Facing?
Bonds – 10-Year Australian Government Bond Futures
Australian government bonds ran headlong into resistance at the 94.20 level, which has capped similar rallies over the course of 2007. Indeed, the contract has fallen quite a bit as traders ramp up speculation that the bank will raise rates in February. Upcoming data could weigh on AGBs further in anticipation of the meeting towards 93.70. On the other hand, if Australian equity markets reverse and tumble, the subsequent risk aversion could lift AGBs towards 94.20 once again.
FX – AUD/USD
As a commodity currency, it has been interesting to see that the rapid ascent of gold prices hasn’t had a bigger impact on the Australian dollar. Nevertheless, AUD/USD declines have rebounded over the past week or so as the 200 SMA served as a springboard for the pair. Looking at upcoming event risk, the release of Australian trade and housing data could propel AUD/USD higher as the figures may encourage the markets to ramp up speculation that the RBA will move to hike rates on February 4 while most other central banks are reducing interest rates or at least considering cutting rates. On the other hand, a rebound in the greenback could weigh on AUD/USD to pull the pair back down towards 0.8700.
Do you think the AUD/USD will rally towards 0.9400 or drop like a rock? Discuss the topic with other traders and DailyFX analysts in the Commodity Currency Forum.
Visit our recently updated Australian Dollar Currency Room for specific resources geared towards the Aussie.
Equities – S&P/ASX 200
While the S&P/ASX 200 has recovered somewhat since tumbling over 24 percent from the November 2007 highs to a low of 5,186.80, fears that a possible US recession and a credit crunch will impair the global financial markets could remain a stress on the index. Now that the Federal Reserve has enacted a total of 125bps in rate cuts over the past two weeks, equity markets in the Asia-Pacific region stabilized as a sigh of relief. However, the 5,860 level has capped recent rallies, and with upcoming economic data likely to support the case for a rate hike by the RBA on February 4, equities could slip once again, especially as the overwhelming trend remains to the down side. The next major level of support looms at 5,400 and should prevent further declines in the near-term.
Written by Terri Belkas, Currency Analyst, Forex Capital Markets LLC, DailyFX.com
Tell us what you think about this article. Email [email protected]
