Asian markets were in a risk-off mood after the PBOC refrained from easing. To top it off, headlines highlighting geopolitical tensions also encouraged traders to flee from risk assets.
Can this sentiment carry on for the rest of the trading day and trigger a reversal for AUD/USD?
Before moving on, ICYMI, I’ve listed the potential economic catalysts that you need to watch out for this week. Check them out before you place your first trades today!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. and U.K. governments in talks to coordinate action against Houthis, risking escalation with Iran and further geopolitical tensions in the region
Over the weekend, Russian energy firm Novatek suspended operations at Baltic export terminal following a fire allegedly from a Ukranian drone attack
Sea Intelligence report suggests that Houthi attacks in Red Sea caused greater damage to global supply chains than COVID-19 pandemic
People’s Bank of China kept 1-year and 5-year prime loan rates unchanged at 3.45% and 4.20% respectively
Price Action News
Overlay of AUD & NZD vs. Major Currencies Chart by TradingView
After pulling off a solid finish last Friday, the Aussie and Kiwi started this week off on bearish footing thanks to downbeat headlines over the weekend.
For one, there were reports that the U.K. and U.S. governments are in talks to coordinate a military campaign against Houthi rebels in Yemen, further escalating the tensions in the region.It didn’t help that shipping data analyst firm Sea Intelligence highlighted the economic repercussions of the Houthi attacks, with the Red Sea crisis reportedly being “the largest single event – even larger than the early pandemic impact” in terms of disrupting supply chains.
To top it off, headlines highlighting Russian energy firm Novatek’s decision to cease some operations in the Baltic export terminal kept traders wary of worsening supply chain disruptions.
Despite all these economic headwinds and China’s shaky property sector, the PBOC refrained from easing monetary policy and instead decided to keep their prime loan rates unchanged.
This translated to sharp losses for risk assets like commodities and higher-yielding currencies like AUD and NZD during the Asian session, but surprisingly the Loonie managed to score some gains.
Upcoming Potential Catalysts on the Economic Calendar:
U.S. CB leading index at 3:00 pm GMT
New Zealand BusinessNZ services index at 9:45 pm GMT
Australia’s NAB business confidence index at 12:30 am GMT (Jan. 23)
Bank of Japan’s monetary policy statement coming up
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
AUD/USD: 15-min
AUD/USD 15-min Forex Chart by TradingView
Risk aversion and the PBOC‘s lack of stimulus combined forces to drag AUD lower across the board early in the week.
This was enough to spur another test of the rising trend line support on the 15-min time frame of AUD/USD. Will we see a bounce or a break this time?
The coast is clear in terms of top-tier catalysts for the next trading sessions, which could keep current market sentiment in play.
The pair is still hanging out at the area of interest which lines up with the pivot point level (.6590) and is near a major psychological support.A break below this region could pave the way for a move to the next bearish targets at S1 (.6750) or even S2 (.6550) that lines up with a minor psychological level.
On the other hand, a return in bullish pressure and risk-on vibes might take AUD/USD back up to R1 (.6610) near today’s highs.
Traders might opt to hold out for the release of Australia’s NAB business confidence index, which is considered a leading indicator for economic activity. The Land Down Under’s flash PMI figures for January might also be better options when it comes to waiting for directional clues.
In any case, make sure you account for the average AUD/USD volatility of 55.2 pips when trading this one!
