Summary:

  • US stock market closed the first trading day this week higher in anticipation of the tax bill implementation
  • Australian business confidence and conditions deteriorated in November
  • AUDUSD could follow its NZ peer but a key resistance remains in place

Beginning with stock markets one may conclude that Asian investors did not follow its counterparts from the US and despite fresh highs registered on Wall Street most of Asian indices closed the day lower (except the Australian S&P/ASX 200 which added 0.25%). It’s especially worth underlining that new peaks on the US stock market took place despite an explosion in mid-town Manhattan during the rush hour commute on Monday. Notice that buying frenzy could stress that many investors are still trying to price in the US tax bill which if implemented might increase stocks’ valuation. Let’s pin down that the SP500 (US500 on xStation5) gained 0.3%, the Dow Jones (US30) moved higher 0.25% while the NASDAQ (US100) increased 0.5%. Let’s also precise that the technology sector index failed to close at a new high despite a decent gain as opposed to US500 and US30.

link do file download linkThe US500 has already neared an upper boundary of an ascending channel and when it’s broken, it could enable bulls to keep on rallying. Notice that the first aim for them could be found at around 2735 points where a reach stemming from the mentioned channel is placed. However, until the price struggles with a resistance successfully a pullback toward a lower limit the channel could be on the cards. Source: xStation5

In turn looking at the FX market we can notice rising demand for commodity-related currencies as NZD, AUD and CAD have gained the most thus far. While the former could still benefit from an appointment of the new governor Adrian Orr, the Canadian dollar is taking advantage of increasing higher prices (those moved higher on Monday even as the speculative net long positioning had remained extremely high). Finally the Australian dollar seems to follow its peers as investors completely downplayed more gloomy business conditions and confidence. According to NAB the conditions index slumped from 21 to 12 whilst the confidence gauge decreased from 8 to 6 in the past month.

link do file download linkThe soft indicators disillusioned in Australia, however the AUD remained unfazed. Source: Macrobond, XTB Research

Technically, the AUDUSD finds itself in a crucial place as it nears an upper boundary of a descending channel. Notice that the kiwi has already broken the same resistance, so should both gain a foothold it could lead to a bolder leg higher on the AUDUSD as well. If so, a move toward 0.7755 might be attainable.

link do file download linkAUD traders shrugged off worse soft readings from the domestic economy as the Australian dollar is second best currency in G10. Source: xStation5