AUD/USD Trades Off Fresh YtD Lows

Early Tuesday trade saw the AUD/USD cross pressured by the broader risk-off dynamic in the wake of fresh Omicron worry stemming from cautious comments from Moderna’s CEO re: a mass vaccine timeline. That was before USD weakness supported the cross into NY trade, although a quick about face then took place on the back of the well-documented hawkish rhetoric deployed by Fed Chair Powell. That wasn’t the end of a frenetic Tuesday session, with the rate pulling back sharply from fresh YtD lows as the DXY drifted away from highs, eventually finishing the day in negative territory. That left AUD/USD a shade below Monday’s close, just above $0.7125, where we trade now.

• Our technical analyst notes that the cross remains soft and printed fresh YtD lows of $0.7063 on Tuesday. Last week's price action resulted in a break of the base of the bull channel drawn from the Aug 20 low. Furthermore, support at the Sep 29 low has been breached, reinforcing bearish conditions. Tuesday's activity saw prices move aggressively through key support at the Aug 20 low, albeit not on a closing basis. Bears now look to the Nov 4 ’20 low ($0.7049). To the upside, initial resistance is at the Nov 26 high ($0.7198).
• Q3 GDP data headlines the domestic docket on Wednesday. Further afield, the latest Caixin manufacturing PMI survey out of China (which is more geared towards SMEs vs. the focus on large firms in the official survey) will be worth watching, especially in lieu of yesterday’s firmer than expected official PMI prints.