AUD/USD Breaks 0.7 as Dollar Selloff Extends

Market overviews

Dollar’s selloff continues on the last trading day of the year, while markets are rather mixed elsewhere. Australian Dollar is the strongest one for now, but it’s followed by Japanese Yen. Meanwhile, New Zealand Dollar is the weakest one, followed by Euro and Sterling. Trading will likely become more subdued as the year is closing.

Technically, AUD/USD is a pair to watch at New Year. Rebound from 0.6677 is extending and it’s pressing 0.7013 projection level. We’ll see if AUD/USD would top around here or break through this level. USD/CAD is another pair to watch as it’s pressing 1.3052 medium term fibonacci support. Decisive break there would pave the way to 1.2673.

In Asia, Japan was on holiday. Hong Kong HSI is down -0.46%. China Shanghai SSE dropped -0.33%. Singapore Strait Times is up 0.01%. Japan 10-year JGB yield is down -0.0037 at -0.016. Overnight, DOW dropped -0.64%. S&P 500 dropped -0.58%. NASDAQ dropped -0.67%. 10-year yield rose 0.021 to 1.895.

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WH Navarro: We’ll probably have a China trade deal signing next week or so

White House trade adviser Peter Navarro talked down speculations that China’s trade delegation to travelling to the US to sign the trade deal this week. He told Fox, “never believe reports on anonymous sources”. Instead, people should get the news from President Donald Trump or trade representative Robert Lighthizer.

Though, he noted that “we’ll probably have a signing on that within the next week or so – we’re just waiting for the translation”. “Basically you need to get it translated into the Chinese and double-checked so both versions match,” he added.

The deal would be made public “as quickly as possible”. And, that would be a “good start” on forced technology transfers, with details on IP protection, and “some good language” on currency manipulations”.

China PMI manufacturing unchanged at 50.2, non-manufacturing dropped to 53.6

The official Chinese PMI Manufacturing was unchanged at 50.2 in December, slightly above expectation of 50.1. PMI Non-Manufacturing dropped to 53.5, down from 54.4, missed expectation of 53.6.

Special analyst Zhang Liqun said there was signs of stabilization but “foundation still needs to be consolidated”. Also “efforts should continue to be made to implement the various policies and measures to achieve the “six stability” and to strengthen the foundation for economic stability as soon as possible.

Wen Tao of Logistics Information Center noted the effect of release of market demand during the holidays. Also, there are productions of consumer goods ahead of Chinese New Year.

Looking ahead

US will release house price indices, but main focus will be on consumer confidence.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6978; (P) 0.6992; (R1) 0.7008; More…

AUD/USD rises to as high as 0.7012 so far and intraday bias remains on the upside. Firm break of 100% projection of 0.6670 to 0.6929 from 0.6754 at 0.7013 will put 0.7082 key resistance in focus. On the downside, break of 0.6965 minor support should indicate short term topping. In that case, intraday bias will be turned back to the downside for 0.6838 support instead.

In the bigger picture, with 0.7082 resistance intact, there is no clear confirmation of trend reversal yet. That is, down trend from 0.8135 (2018 high) is still expect to continue to 0.6008 (2008 low). However, decisive break of 0.7082 will confirm medium term bottoming and bring stronger rally back to 55 month EMA (now at 0.7506).

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
01:00 CNY Manufacturing PMI Dec 50.2 50.1 50.2
01:00 CNY Non-Manufacturing PMI Dec 53.5 53.6 54.4
14:00 USD S&P/CS Composite-20 HPI Y/Y Oct 2.20% 2.10%
14:00 USD Housing Price Index M/M Oct 0.30% 0.60%
15:00 USD Consumer Confidence Dec 128 125.5