IC Markets Asia Fundamental Forecast | 23 September 2021

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What happened in the US session?

The FOMC gave notice that a reduction in asset purchases may be completed by mid-2022 provided economic goals continue to be met. Seven rate hikes can be expected over the Fed’s forecast horizon, with at least one hike expected in 2022. The terminal rate remains at 2.50%.

What does it mean for the Asia Session?

The greenback is likely to sustain gains against other major currencies as the tapering timeline by the US central bank becomes apparent.

China’s Evergrande is likely to default on its offshore bond interest payments, with about US$20 billion of US$305 billion outstanding debts owed offshore, according to Refinitiv data. This possibility would continue to weigh on Aussie and the Kiwi.

The Dollar Index (DXY)

Key news events today

No major news events.

What can we expect from DXY today?

The likelihood of an official announcement on tapering in November is high; following Fed chair Powell’s statement that the taper may end in the middle of next year.

The Fed maintained its view on inflation as being transitory and the labour market unemployment to fall to 3.5% in 2023.

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

Fed chair Powell’s dismissal of Evergrande’s impact on the US and a hawkish tilt of the central bank are likely to subdue the ‘flight-to-safety’ demand for the precious metal, evident from sustained gains in both the equities and commodities markets.

Next 24 Hours Bias

Weak Bearish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The dovish central bank and the gradual increase in vaccination rate, currently around 39% (target 70-80%) should continue to see bearish pressure on the Aussie.

As China’s Evergrande is one of the major property owners in Australia, the possible default on the offshore bond holdings by the property developer may add further woes to the bearishly-pressured currency.

Next 24 Hours Bias

Weak Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

The potential strain on New Zealand’s major trading partners, China and Australia, from a highly possible default from China’s Evergrande on its offshore bond payments, is likely to cloud the prospects of the Kiwi despite an imminent rate hike in October.

Next 24 Hours Bias

Weak Bearish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

Demand for the safe-haven currency is likely to be sustained as China’s Evergrande settled some onshore bond payments but the risk of failure remains high, particularly if offshore bondholders are not willing to accommodate less/ late interest payments. Late debt payments could trigger cross-defaults.

Next 24 Hours Bias

Weak Bullish