Despite a weak performance from Wall Street, the Australian Dollar stabilized on Tuesday due to positive regional sentiment.
The Dow Jones, S&P 500, and Nasdaq indices all recorded a decline at the close of their cash session. Specifically, the Dow Jones index decreased by 0.04%, while the S&P 500 index and Nasdaq index dropped by 0.45% and 1.16%, respectively.
In the context of US interest rate markets, the Federal Reserve’s timeline for rate cuts has been delayed, with predictions indicating that the initial rate cut will occur in early 2024.
In the current financial climate, Treasury yields are exhibiting a marginal increase across maturities, except for the 2-year note which has experienced a decline and now stands below the 4.70% threshold.
Currently, there is a general weakness observed in the US Dollar in relation to other currencies, particularly benefiting high beta currencies such as the Australian and New Zealand Dollars.
The United States government has disclosed that Treasury Secretary Janet Yellen is scheduled to travel to Beijing in July. This development suggests that the previously chilly relationship between China and the US may be improving.
During a recent address, the leader of China, Premier Li Qiang, made insinuations regarding further strategies aimed at enhancing the global economy’s second-largest nation.
The Yuan was fixed at a stronger rate than expected by the People’s Bank of China, which had a positive impact on regional sentiment.
The CSI 300 on the mainland and the Hang Seng Index in Hong Kong exhibited a positive trend, which seemed to have a supportive impact on the ASX 200 in Australia. However, the indexes in Japan and South Korea are experiencing a decline.
Despite the reappointment of Masato Kanda as Vice Finance Minister for International Affairs, USD/JPY persists in trading near its 7-month high.
The position entails supervision of the FX market and specifically, decision making regarding intervention. During his tenure in late 2022, the USD/JPY exchange rate experienced a decline from its peak above 150 following Japanese intervention.
As of 2023, the bank has not yet taken any physical action but has initiated some verbal persuasion as the price gradually increased beyond 140.
During the recent geopolitical developments, President of Russia, Vladimir Putin, labeled the Wagner group as traitors. As of now, the impact of this situation on the markets seems to be relatively minimal.
Thus far this week, there has been a degree of containment with regards to energy commodities. The WTI futures contract for crude oil remains stable at approximately US$ 70 bbl, while the Brent contract sits slightly above US$ 74.50 bbl. Additionally, gold is currently trading at slightly below US$ 1,940.
In the near future, the United States will experience a report on durable goods orders, while Canada will receive a Consumer Price Index (CPI) update for May.
The full economic calendar can be viewed here.
AUD/USD Technical Analysis weekly chart
According to the weekly chart, the price action at the conclusion of the previous week resulted in the formation of a Bearish Engulfing Candlestick. This occurrence may indicate that a reversal is occurring and bearish momentum could develop.
There is a possibility of encountering resistance in the range of 0.6800 to 0.6820, which is located prior to the previous peaks of 0.7011 and 0.7030. Additionally, there is a cluster zone in the range of 0.7137 to 0.7157 that may also pose as potential resistance.
Potential support levels may exist at the breakpoints of 0.6574 and 0.6565, as well as the low observed in late May which stood at 0.6458.