IC Markets Asia Fundamental Forecast | 26 November 2021

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What happened in the US session?

The lack of data releases and new flows amid the US Thanksgiving holiday saw consolidation across the board. Speeches by both ECB’s and BoE’s governors, Lagarde and Bailey, respectively, failed to ignite sustained trends during the session as they reiterated current stances.

What does it mean for the Asia Session?

Amid a quiet session anticipated, the Australian October retail sales data may give a short-term reprieve for the AUD bulls within the overarching downtrend against the US dollar, driven by monetary policy divergences between the central banks.

The Dollar Index (DXY)

Key news events today

No major news events.

What can we expect from DXY today?

Further consolidation is likely to be seen on the greenback amid the holiday mood. The overarching theme of a hawkish Fed and decades-high inflation would see the US dollar keeping most of its gains accumulated over the past few days.

Central Bank Notes:

  • Taper at the preset pace of US15 billion per month from mid-November
  • Emphasised clear divide between tapering and rate liftoff
  • Next meeting on 15 December 2021

Next 24 Hours Bias

Mixed

Gold (XAU)

Key news events today

No major news events.

What can we expect from Gold today?

The holiday mood spill over is evident on Gold. The precious metal failed to sustain its bounce off a strong technical support area due to the sluggish price movement in the Treasury yields. A similar scenario can be expected for this last day of the trading week.

Next 24 Hours Bias

Mixed

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The expected increase in the upcoming Australian October Retail Sales, foreseen at 2.5% (prev. 1.3%) may give a mild boost to the bulls but the overarching downtrend, driven mainly by RBA’s dovish stance, is likely to renew the downleg to the low from September around 0.7170 and even the current year’s low around 0.7100 on AUD/USD thereafter.

Central Bank Notes:

  • Plausible that the first interest rate increase will be not before 2024
  • Will not raise rates to control house prices/ inflation
  • Next meeting on 7 December 2021

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 ongoing rate hike cycle by the RBNZ would provide a base for a rebound off the support zone formed by the lows from September and August on NZD/USD, between 0.6850 – 0.6800. With the central bank having stated that future moves are contingent on inflation and employment, the next key data point, the inflation data set, would only come in late January 2022.

Central Bank Notes:

  • Will continue to reduce monetary policy stimulus
  • Future moves contingent on inflation and employment.
  • Next meeting on 23 February 2022

Next 24 Hours Bias

Weak bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The Bank of Japan is reported to be considering a reduction in Covid-19 relief measures as early as April 2022. The plan is not likely to derail USD/JPY’s path towards the 2016/2017 highs around the 118.50 region amid overarching monetary policy divergences from the respective central banks.

Central Bank Notes:

  • Lowered FY2021 GDP projection to 3.4% (prev. 3.8%); core inflation projection to 0.0% (prev. 0.6%)
  • Governor Kuroda stated that current weakness in Yen reflects the fundamentals
  • Next meeting on 17 December 2021

Next 24 Hours Bias

Mixed