Crude Oil Price Falls on Record US Output, Trade Data May Hurt AUD

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Asia Pacific Market Open – British Pound, Brexit, Crude Oil, Australian Dollar

  • Stock and foreign exchange markets diverged in the final trading day of a rather shaky month
  • British Pound rose on Brexit deal hopes while crude oil prices declined on record US output
  • The Australian Dollar may be at risk to a smaller trade surplus amidst soft Chinese growth

We just released our 4Q forecasts for currencies like the US Dollar in the DailyFX Trading Guides page

On Wednesday, global stock markets could have been characterized as behaving jubilantly. The Nikkei 225, DAX and S&P 500 climbed 2.16%, 1.42% and 1.09% respectively. This allowed them to trim some of their shaky performance in October. Generally, stocks were under fire last month as bigger fundamental themes such as Fed tightening, emerging markets fears and political uncertainty soured the mood in investors.

Despite the ‘risk on’ behavior in the last trading day of October, foreign exchange markets behaved rather oppositely. Pro-risk currencies such as the Australian and New Zealand Dollars largely underperformed while the anti-risk Japanese Yen soared. This may have been due to lackluster Australian CPI data and softer gauges of China’s industrial sector during APAC trade.

This placed those aforementioned currencies in a tough spot to reverse their progress ahead of European and US trading sessions. One FX major that shined above all was the British Pound, bolstered by signals that a Brexit deal could be reached by November 21st. Meanwhile sentiment-linked crude oil prices also diverged with stocks, falling after a report from the EIA that US output rose 3.8% in August to a record 11.346m b/d.

Thursday’s Asia Pacific trading session contains September’s Australian trade balance. Lately, local economic news flow has been tending to underperform relative to economists’ expectations. This opens the door to an unexpected smaller surplus, especially with China’s economy slowing. Since the nation is Australia’s largest trading partner, this may translate into adverse knock-on effects which may hurt AUD.

Australian Dollar Technical Analysis

The Australian Dollar still remains stuck around a familiar area of former support now resistance at 0.70830. The pair has been struggling to make progress in either direction after bottoming on October 5th. However, the fundamentals seem biased to the downside and my AUD/USD short at 0.70839 with a daily close above 0.71452 still remains in play. You may follow me on twitter @ddubrovskyFX for updates to the setup.

AUD/USD Daily Chart

Crude Oil Price Falls on Record US Output, Trade Data May Hurt AUD

Forecasts:

Australian Dollar Technical Outlook

Japanese Yen Fundamental Outlook

US Trading Session

Crude Oil Price Falls on Record US Output, Trade Data May Hurt AUD

Asia Pacific Trading Session

Crude Oil Price Falls on Record US Output, Trade Data May Hurt AUD

** All times listed in GMT. See the full economic calendar here

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